The recent news that Strategy sold off 32 Bitcoins recently has gained attention, as the company is usually known for its buys of this largest cryptocurrency even during times of market stress.
If we take a closer look at Strategy’s overall holdings, the amount of BTC sold can be termed as peanuts if we compare it, as it’s too small to influence price or show a change of policy. What was significant was that a volatile market was given a reason to cling to the already occurring downturn. According to this analysis, it seems to be the most important element of the situation. The on-chain information was already going through a weak state before the news broke and the sell from the Strategy was more as a justification to turn negative sentiment.
What the metrics confirming
The Binance Fund Flow Ratio is at a low of 0.01 and, at the time of writing, near its lowest since January. It is also the most optimistic data in an hour filled with fear headlines and a 2.92 percent price decrease.
It is the exchange inflows that mark points towards it. However, it remains on the silent side and the large holders still do not really appear to be panicking to leave. This time the fear narrative does seem to be more intense than the money moving.
NUPL at 0.27 indicates that it would keep the market on the positive side, but it is more about the trend of the NUPL value. It experienced a drop before the price tagged “failure” in the middle of May. Holders were not holding for the highs and were reducing their exposure towards strength. But the level of 0.27 is still away from the fear stage, and a weekly decline of NUPL away from 0.35 to 0.27 points out towards a slow, orderly liquidation of profitable holders and this works out.
The MVRV ratio of 1.36 readings cannot be termed as the cycle top and additionally, the readings at past peaks have been an order of magnitude higher. What the reading is indicative of, however, is the fact that the market cap/realized cap spread has been on a narrowing trend. It topped out with price in mid-May and from that time period, it has faced downside. This can be termed more of a confirmation. On-chain and price are aligning, which means that it falls to price action to prove otherwise.
The question about liquidity that happened in the past
Agne Linge, Managing Director at Blockcol Consulting and Advisor to the Board at Wefi, told The Coin Headlines that:
“The recent debt buyback may improve the headline credit story, but it also reduces cash flexibility. Strategy disclosed that after the transaction it held 843,738 BTC, $6.7 billion of convertible notes, $15.5 billion of preferred stock outstanding, and a USD reserve of $871 million. That reserve matters because dividend and interest obligations are now a real part of the story, not just a footnote.
That said, I do not think future Bitcoin sales are inevitable unless market conditions deteriorate materially. Strategy still has options, including equity issuance, preferred stock issuance, and reserve rebuilding. But those options become less attractive if the stock trades poorly or Bitcoin remains under pressure.”
Also, Linge has the strong point that the market is right to criticize the structure. While the risks are material, specifically concerning liquidity management and alignment of interests, they are more of a medium-term challenge than a short-term solvency risk. Strategy’s model is more sensitive towards the confidence and that confidence can rapidly change if this largest cryptocurrency fails to move in the appropriate direction.
The important levels
Bitcoin is at $71,526.01, and this is at the low end of the $70,000–$72,000 region. In the case it can’t sustain above $70,000 it then creates panic among the short-term holders and may trigger the selling action rapidly. This further accelerates the NUPL compression that will create feedback loops that become increasingly difficult to break out of without a true demand driver. Under the price level of $70k, it becomes more clear on the sell signal, where a clear downward spiral is formed by the important metrics of NUPL and MVRV. The strategy’s 32 BTC selloff is negligible; pressure already existed.