Analyst breaks down the impact of micro strategy buying on Bitcoin

A research firm has broken down how the Bitcoin price has reacted to 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 analysis piece that looks at how the market has been affected by each round of purchases that MicroStrategy has gone on.

The research firm has found that Bitcoin has typically seen an upside during the periods that MicroStrategy has bought. Note that during, what is meant here are the actual dates the purchases occurred and not when the announcements were made.

Here is a chart showing the return of Bitcoin in each of the periods in which 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 graph above, although it has not been the case every time, these periods have still tended towards positive returns for the cryptocurrency. The last purchase, in which the company bought 6,455 BTC (and also paid back the entire Silvergate loan), so the coins rose by 17%.

On average, Bitcoin has had a positive return of around 6.2% during these buying periods. This trend naturally makes sense, as the research firm noted that MicroStrategy’s purchases act as a constant buying presence in the market.

Now, the more interesting trend becomes apparent when looking at the return on the asset that followed immediately after MicroStrategy made formal announcements about its purchases. The chart below shows how BTC performed on the day of these announcements, as well as how it did a week after them, over the past few years.

BTC has generally seen red returns after these announcements | Source: K33 Research

Unlike the buying periods, MicroStrategy’s announcements have typically seen a negative reaction from the market. On the days the company made these announcements, the price has taken an average 2.2% hit. In terms of weekly returns following the announcements, the average return has been negative, but only slightly at -0.2%. Following news of the latest purchase from the firm, Bitcoin has seen a 3% drop

As for why these red returns have typically been observed following such announcements, K33 Research explains, “this market reaction may be caused by market participants absorbing the information that a known large buyer has completed, meaning less buy-side liquidity to support further upside .”

Back in September, MicroStrategy signed a sales agreement with Cowen and BITG, which allowed them to issue and sell shares at a combined price of up to $500 million.

So far, the firm has issued and sold $385.8 million worth of shares, meaning they can only issue and sell $114.2 million worth of shares to buy more Bitcoin.

“Thus, while MicroStrategy was able to prepay its Silvergate loan at a 25% discount, the market is pricing in a known large buyer as having less short-term firepower left to generate upside momentum,” the research firm notes.

BTC price

At the time of writing, Bitcoin is trading around $27,900, up 1% in the past week.

The value of BTC has seen some drawdown in recent hours | Source: BTCUSD on TradingView

Featured image from Kanchanara on Unsplash.com, Charts from TradingView.com, K33.com