A research firm has broken down how the price of Bitcoin has reacted to the purchases Michael Saylor’s MicroStrategy has made over the years.
MicroStrategy’s Bitcoin Purchases Have Been Followed By Negative Price Action
K33 Research, formerly Arcane Research, has released a new piece of analysis that looks at how the market is affected by each purchase MicroStrategy makes.
The research firm found that Bitcoin usually experiences an increase during the period MicroStrategy has bought. Note that throughout, what is meant here is the actual date when the purchase occurred and not when the announcement was made.
Here’s a chart showing Bitcoin returns during each period MicroStrategy bought at least 1,000 BTC over the past few years:
Looks like the greatest positive return was registered back in August 2021 | Source: K33 Research
As shown in the chart above, although it doesn’t happen every time, these times still tend to have positive returns for cryptocurrency. The latest purchase, in which the company received 6,455 BTC (and also paid back the Silvergate loan in full), increased the coin by 17%.
On average, Bitcoin has had a positive return of about 6.2% during the buying period. This trend is natural, as the research firm notes that the purchase of MicroStrategy acts as a continuous buying presence in the market.
Currently, a more interesting trend is seen when looking at the return on assets that continued after MicroStrategy made the official announcement of the purchase. The chart below shows how BTC performed on the same day as the announcement, as well as the week after it, over the past few years.
BTC has generally seen red returns after these announcements | Source: K33 Research
Unlike buying time, announcements made by MicroStrategy usually see a negative reaction from the market. On the day the company made the announcement, the price averaged 2.2%. Regarding the weekly return after the announcement, the average return was negative, but only by -0.2%. Following news of the company’s latest purchase, Bitcoin has dropped 3%.
As for why this red yield is usually observed after the announcement, K33 Research explains, “this market reaction may be caused by market participants absorbing the information that has been completed by a large buyer, which means less liquidity buys to support the rise again.”
Back in September, MicroStrategy signed a Sales Agreement with Cowen and BITG, which allows them to issue and sell shares for an aggregate price of up to $500 million.
So far, the company has issued and sold $385.8 million worth of shares, meaning it could only issue and sell $114.2 million worth of shares to buy more Bitcoins.
“Thus, when MicroStrategy managed to prepay the Silvergate loan at a discount of 25%, the market has priced in large buyers known to have less short-term gunpowder left to generate upward momentum,” notes the research firm.
BTC price
At the time of writing, Bitcoin is trading around $27,900, up 1% over the past week.
The value of BTC has seen some drawdown in recent hours | Source: BTCUSD on TradingView
Featured images from Kanchanara on Unsplash.com, charts from TradingView.com, K33.com