Bitfinex: Strategy's sale of 6,948 bitcoins is a narrative risk

Microstrategy suspends Bitcoin sales for two weeks, and market sentiment barrier lifts

According to Bitfinex analysts, Strategy sold 6,948 bitcoins from the end of May to the beginning of August, and the company suspended Bitcoin sales for two consecutive weeks, which has eliminated a three-month market sentiment barrier.

Summary

Microstrategy reported no bitcoin transactions for the second consecutive week.

The company raised $2.01 billion by selling MSTR shares.

The 840,447 bitcoins it holds have been profitable because the bitcoin transaction price is above the average cost of US$75,385.

Bitfinex said previous sales had a greater impact on market sentiment than on the available supply of Bitcoin.

MicroStrategy's sales of 6,948 bitcoins are more of a symbolic impact

Bitfinex analysts pointed out in a report on August 28 that the 6,948 bitcoins sold by MicroStrategy are small relative to daily spot trading volume, but as the company's largest holder of corporate bitcoin, each weekly sale generates an extra weight among traders.

Analysts said: "The largest corporate holders are selling" became a recurring bearish argument between May and August. Although these sales did not cause a large-scale supply shock, Monday's document disclosures raised concerns that more Bitcoin could enter the market.

MicroStrategy's latest Form 8-K (covering August 17 to August 23) reports no Bitcoin purchases or sales. This is the second consecutive week that disclosure documents show no change in its 840,447 Bitcoin positions.

With Bitcoin trading prices approaching US$78,700, Microstrategy's positions have exceeded its average acquisition price of US$75,385. The company paid approximately $63.36 billion (including fees and expenses) for these positions, which are currently worth close to $66 billion at the price quoted by Bitfinex.

MicroStrategy began selling Bitcoin at the end of May, ending years of almost one-way holdings in its treasury. It was previously reported that the first transaction involved the sale of 32 bitcoins at an average price of US$77,135. The sale raised approximately $2.5 million, or only 0.0038% of the company's holdings at the time, but it was the first Bitcoin sale MicroStrategy reported since a tax-related transaction in December 2022.

Executive Chairman Michael Saylor prepared investors mentally during the MicroStrategy first-quarter earnings conference call. After the company reported a net loss of $12.54 billion, driven mainly by unrealized losses on Bitcoin holdings, Siler said Microstrategy "may sell some Bitcoin to use dividends" and "get the market used to it."

As Bitcoin continued to be under pressure during the summer, larger sales followed. MicroStrategy sold 3,588 bitcoins in early July, raising approximately $216 million to pay dividends related to its preferred securities. Subsequently, 1,638 bitcoins were sold in the week ended August 2, raising $104.73 million, and another 1,690 bitcoins were sold in the week ended August 9, raising $108.6 million. The company uses subsequent earnings for STRC preferred stock dividends and buybacks. Its August 10 filing showed that all of the $108.6 million proceeds from the sale of 1,690 bitcoins were used to repurchase approximately 1.15 million STRC shares.

By early August, cumulative sales reduced microstrategy's reserves to 840,447 bitcoins. Bitfinex calculated that all sales from late May to early August totaled 6,948 bitcoins, raising approximately $432.5 million. Analysts said the figure was "insignificant" compared to the daily bitcoin spot trading volume. Instead, the market's focus is on whether preferred stock obligations will make microstrategies a seller of repeated Bitcoin when other financing channels weaken.

MSTR issuance has replaced Bitcoin as a source of funding

Microstrategy did not sell more Bitcoin, but instead raised approximately US$2.01 billion in net income by issuing approximately 18.26 million shares of MSTR common stock between August 17 and August 23. This total is approximately six times the amount raised in the previous week's reporting period.

MicroStrategy used $136.4 million of that to repurchase approximately 1.43 million STRC preferred shares at a price below its $100 face value. Another $300 million was deposited in its dollar reserves, increasing the balance from $4.8 billion to $5.1 billion. The remaining $1.59 billion was deposited in a newly established cash account. As of August 23, the two accounts combined held approximately US$6.69 billion.

During the same period, MicroStrategy did not purchase any bitcoins. Bitfinex reported that the company has raised approximately $2.35 billion through an MSTR offering in the past two weeks, but has not used any proceeds to buy Bitcoin. Instead, the funds are used to repurchase preferred shares, dividend coverage and increase liquidity. Management established the US dollar reserve to cover the payment needs of micro-strategy preferred stock and outstanding debt, thereby reducing the need to sell Bitcoin when regular cash obligations expire.

During the previous no-sales week, MicroStrategy raised $333.7 million through MSTR issuance, of which $149.1 million went into U.S. dollar reserves,$132.2 million was used for STRC repos, and $52.4 million was used for STRC dividends. Bitfinex said this model suggests management currently prefers to issue common stock before selling additional bitcoins. With reserves now providing nearly three years of payment coverage, analysts believe it is unlikely that Bitcoin will be sold again unless the STRC faces severe price pressure and other financing options become less attractive.

Microstrategies remain neutral, not Bitcoin buyers

The suspension of weekly sales has not yet restored MicroStrategy's previous role as a source of stabilizing Bitcoin demand. In the past two reporting periods, the company has neither bought nor sold bitcoins, and its position remains unchanged at 840,447. As a result, Bitfinex describes microstrategies as neutral rather than active buyers.

Bitcoin now competes with multiple uses for funds raised through MSTR offerings. Microstrategies can use funds for STRC repurchases, preferred stock dividends, debt payments, dollar reserves, new cash accounts, or additional Bitcoin purchases. President and CEO Phong Le has said that the company expects to resume increasing holdings in 2026. In August, he pegged future purchases to the STRC's return to par value of $100, when MicroStrategy could issue more preferred shares under better conditions. Feng Le said in an earlier interview: "We will continue to build. Yes, when Stretch returns to par value, we will issue more preferred shares and buy more Bitcoin."

Microstrategy has not announced the specific date or amount of the next purchase. Its documents show that supporting the STRC and accumulating cash become priorities during periods when preferred stock prices are below the level management wants to maintain. Bitfinex also pointed out that dilution risks still exist for MSTR holders. When stocks are traded at a low premium relative to the company's Bitcoin value, issuing common stock weakens the bitcoin per share measure that MicroStrategy uses when discussing shareholder performance.

Analysts said bitcoin's fall again into the range of around $60,000 could also tighten the company's financing situation. During the summer sell-off, weaker bitcoin prices sent microstrategy positions below cost, while lower MSTR prices made common stock offerings more dilutive.

U.S. investors face exposure through MSTR and STRC

Capital decisions on microstrategies directly affect U.S. investors because MSTR and STRC are traded on Nasdaq, and companies disclose their weekly bitcoin and securities transactions through filings with the U.S. Securities and Exchange Commission. MSTR investors gain indirect Bitcoin exposure through a listed company, but the return may differ from Bitcoin's performance because MicroStrategy also issues common shares, pays dividends on preferred shares, repays debt, and repurchases securities. Preferred shareholders have priority over ordinary shareholders in dividend payments and certain claims.

According to Bitfinex data, the latest documents show that MicroStrategy is selling MSTR at an average price of about $110 per share, up from about $96 the previous week. Higher prices allow the company to raise more cash per share, while Bitcoin's recovery has left its remaining treasury positions above average acquisition costs. STRC remains another factor in the company's capital plan. Microstrategy designed the floating-rate perpetual preferred stock to trade at close to $100 and maintained an annualized dividend yield of 12% in August, while conducting regular repurchase at prices below face value.