Experts assessed to what extent rumors about the company's sale of cryptocurrency assets were justified

26.07.2022

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5 min

When Tesla reported the sale of 75% of its bitcoin holdings for a total of $936 million, the bitcoin exchange rate reacted with a decline. Elon Musk's company is one of the largest holders of cryptocurrency among public companies, but the leader of this list remains MicroStrategy, which has been building up reserves in BTC since 2020, and does not seem to be going to sell them even suffering losses due to crypto winter.

Under the scrutiny of crypto investors were addresses that are proven or suspected to be associated with other major market players with bitcoin assets in their portfolios. Several posts appeared on Twitter that drew attention to the fact that several transfers totaling about 242 000 BTC to Coinbase exchange were made from the same address during the week. According to some speculations, this address could be related to MicroStrategy CEO Michael Saylor, and the bitcoins were put on the exchange to be sold by his company following Tesla.

The rumor was refuted by several researchers, including the head of analytics firm CryptoQuant, Ki Young Ju. The analyst called speculation about MicroStrategy selling bitcoins just rumors and manipulation to provoke a drawdown in the rate. After the publication, Michael Saylor posted a tweet with an emoji of a diamond and hands. Diamond hands is a term for investors who hold an asset even during periods of market volatility.

When MicroStrategy started buying bitcoins in the summer of 2020, Saylor attributed it to the fact that inflation would devalue fiat money sooner or later. The company's total accumulated bitcoins are now $3,2 billion cheaper than they were in the first quarter of this year, when the company's cryptocurrency assets were valued at $5,9 billion.

The company's reserves include 129699 BTC, which is equivalent to $2,7 billion at the rate of July 26. On June 28, the company bought another 480 BTC, specifying that the average purchase price of all of the company's bitcoins is $30 664.

The likelihood that Michael Saylor will decide to liquidate his bitcoin position in the near future is extremely low, says Vladislav Utushkin, founder of TOTHEMOON group of companies. “The head of MicroStrategy is a convinced crypto holder, for whom the value of a hundred thousand and even a million dollars per 1 BTC is quite achievable and expected level,” the expert notes, “As an experienced player he knows that the market is cyclical, and unrealized “paper” losses are not.”

Unlike many top executives, Saylor speaks openly about personal assets in cryptocurrency. The head of MicroStrategy owns 1 732 BTC, worth more than $370 billion at the time of publication. According to BitInfoCharts, Saylor is among the top 100 bitcoin holders.

Speculating on the likely sale of bitcoin by MicroStrategy or other players, Cryptorg trading platform CEO Andrey Podolyan notes that the decision to buy or sell the asset will depend primarily on the investment strategy of the company, and how long it will be able to sustain losses and keep its investors without profit. According to the analyst, if the bitcoin rate goes to the area of $14-15 000, companies are likely to record losses. “But at the same time, this moment will be an entry point for other large companies that are currently without positions,” Podolyan adds.

Citing data from Arcane Research, analyst Vetle Lunde described in a series of tweets that massive bitcoin sales by big players began with the collapse of the Terra ecosystem, when its founder Do Kwon sold 80 000 BTC to support the TerraUSD (UST) algorithmic stablecoin. This triggered further pressure on the price, resulting in large institutional investors selling 236237 bitcoins.

The forced collapse of Three Arrows Capital (3AC), a fund that managed billions of dollars worth of borrowed crypto assets, led to the bankruptcy of the Celsius and Voyager lending companies. According to 3AC's published bankruptcy filings, the fund owed creditors 18 193 BTC and the equivalent 2 054 BTC of other crypto assets.

The inner workings of Celsius. What led to the collapse of one of the largest cryptocurrency lenders

MicroStrategy also leveraged to buy bitcoins, but the company may not fear a forced liquidation of its position, Vladislav Utushkin notes. “Despite the fact that the average entry price for MicroStrategy has now increased to more than $30 000 per BTC, and the loss was almost $900 million, the total amount of loans to buy the asset is only $200 million. Thus, MicroStrategy will be able to collateralize its loan up to the $3,5 per coin level, which we will not likely see.” The loan is due to expire in the spring of 2024, by which time “the situation in the crypto market could change dramatically.”

Based on analysis by Arcane Research, Lunde points out that the last two months have been a “capitulation phase.” Now, in his opinion, the cascade of big sales is declining, as is the general uncertainty of the whole market.

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