Why Strategy’s Bitcoin Buys Could Pose Long-Term Risks Despite Boosting Demand

Acquisition vehicles have successfully stimulated the demand for bitcoin in recent years, but their aggressive accumulation strategies can undermine the institutional profession of actively.

That is according to the latter analysis Van Swiss Digital Asset Bank Sygnum, published on Tuesday.

Although these vehicles have supported the market demand, Sygnum warned that the aim of the strategy to possess 5% of Bitcoin’s delivery risks that undermine its status as a safe haven and make it unsuitable as a reserve for central banks.

The strategy was purchased on Monday Another 1,045 Bitcoin, Waard about $ 110 million, which brings the current total to 582,000 BTC, equal to almost 3% of the maximum Bitcoin offer that will ever exist.

These purchases have won according to a rough profit of more than 56% estimation From Saylor Tracker.

Although this has contributed to stimulating the price and profile of Bitcoin, Sygnum warns that the concentration is approaching dangerous levels.

“Large, concentrated companies are a risk for each active, Sygnum said in his report.” The interests of the strategy are approaching a point at which they become problematic. “

By portraying leverage, a large-scale approach as the “new standard” strategy, strategy can overshadow the valid case for smaller, risk-corrected treasury tests, which Sygnum fits better for most companies.

Liquidity, market structure risks

The model of the strategy has a high-beta-proxy, with the help of convertible debts to acquire more Bitcoin and at the same time take advantage of the momentum of his own share price during bull markets, according to one analysis By Sherwood.

Every time Bitcoin gathered, the shares of the strategy, MSTR, acts with a premium, allowing the company to attract capital and buy more Bitcoin, thereby fueling a cycle of leverage and bullish sentiment.

Yet the risk in these scenarios is clear.

When Bitcoin enters a long -term downturn and MSST falls under the conversion prices of its outstanding banknotes, the model starts to crack and it can be forced to liquidate part of his Bitcoin Holdings to cover debt obligations, Sygnum researchers explained.

“The eternal dividend reduces the risk” of Bitcoin purchases funded by debts, whereby profits and losses move in Lockstep, they noticed.

But if a strategy “chooses to sell Bitcoin instead to prevent the extra resistance of the stock tax credit”, the result can be a “very harmful signal for the market”.

Edited by Sebastian Sinclair