MicroStrategy was once one of the most aggressive Bitcoin buyers in the market and has long been known for its "never sell" stance. However, the company has recently begun selling Bitcoin to replenish its dollar reserves, pay preferred stock dividends and interest, and repurchase Digital Credit Securities. This means that one of the key structural buyers that have supported the Bitcoin market is now shifting into a selling pressure.

At the same time, the macro environment is improving. At the FOMC meeting at the end of July, only 3 out of 12 voting members supported an interest rate hike, and the cooling labor market and falling inflation further reduced the likelihood of a rate increase in September. However, unlike stocks which benefit from pension allocations and corporate buybacks, and gold which benefits from central bank reserve diversification, Bitcoin lacks similar stable structural buyers. Therefore, MicroStrategy's continued selling has become an important variable affecting short-term market risk appetite.

MicroStrategy from Largest Buyer to Seller: Approximately $4.5 Billion in Bitcoin Still for Sale

MicroStrategy has accumulated approximately $62 billion worth of Bitcoin, and even accelerated its purchases at times during price declines. But this trend has recently reversed. According to analysts, the company may plan to reduce its stock of STRC (Digital Credit Securities) from about $10 billion to $5 billion, with Bitcoin sales potentially becoming the main source of funding for achieving this goal. If so, the company may need to sell approximately $4.5 billion worth of Bitcoin and is expected to complete this in batches over the next two to four months.

While this sale size is not huge relative to the overall Bitcoin market, its impact is more reflected in risk appetite. MicroStrategy has long acted as a structural buyer, but is now gradually becoming a marginal seller. If the pace of sales remains around $100 million per week, the selling pressure may persist for a longer time; unless there are stronger macro catalytic factors driving a massive return of Bitcoin ETF buying, short-term rebounds may still be limited.

Deeper changes are coming from the capital models of Bitcoin reserve companies. The so-called "BTC Yield" has largely come from the NAV premium of stocks relative to Bitcoin holdings. When this premium narrows or even turns into a discount, the model that relies on capital market financing and continues to increase Bitcoin holdings also starts to face challenges.

NAV Discount Widening: Potential Selling Pressure from Bitcoin Reserve Companies Could Reach Up to $7.5 Billion

Among the 109 tracked Bitcoin reserve companies, 28 companies currently have a market value lower than their Bitcoin holdings value, meaning their mNAV is below 1.0 times, with these companies holding a total of about $3 billion in Bitcoin. For companies whose stock prices are long-term below asset values, selling some Bitcoin and repurchasing stock may become a way to narrow NAV discounts and release shareholder value.

This means that potential selling pressure does not only come from MicroStrategy. In the coming months, the collective potential selling amount from Bitcoin reserve companies could reach up to about $7.5 billion. Meanwhile, if these companies hope to attract capital again, they also need to shift from financing models reliant on NAV premiums to strategies that can generate actual returns, such as selling covered call options on Bitcoin, lending BTC, or engaging in basis trading.

However, the NAV discount also brings another aspect. Currently, the implied Bitcoin price corresponding to some reserve company stocks is only about $20,000, while the spot Bitcoin price is around $63,000, which is about 0.3 times. In contrast, in November 2024, the implied Bitcoin price corresponding to MicroStrategy’s stock price once reached 2-3 times the actual spot price. If management takes proactive measures to narrow the discount, some companies may see significant valuation recovery potential.

Overall, MicroStrategy's transition from a long-term structural buyer to a seller is changing the funding flow structure of the Bitcoin market. In the next two to four months, the company may still sell about $4.5 billion in Bitcoin, while the total potential selling amount from all Bitcoin reserve companies could reach up to about $7.5 billion, putting pressure on market risk appetite in the short term.

But this change has not altered the judgment that Bitcoin is bottoming out, and the low point of this cycle is still expected to be officially established by the end of this month or next month. What is more worth paying attention to next is when MicroStrategy's selling will clear, whether ETF buying will return, and whether Bitcoin reserve companies under NAV discounts can release value by proactively adjusting their capital strategies.

The above views are partly sourced from BIT on Target, Contact us to obtain the full report of BIT on Target.

Disclaimer: The market has risks, and investment requires caution. This article does not constitute investment advice. Trading in digital assets may involve significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consulting financial professionals. BIT is not responsible for any investment decisions based on the information provided in this content.

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