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Analysis
28 Mar 2023

What happens when Michael Saylor buys bitcoin?

Spoiler: Prices go up - then down.
MicroStrategy bitcoin purchases
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MicroStrategy BTC purchase announcements tend to be followed by short-term negative price action. On Monday, BTC quickly fell 2.2% after MicroStrategy announced a purchase of 6,455 BTC and a repayment of its Silvergate loan in full. From January 1 to March 23, MicroStrategy issued and sold $339.4m of its class A common stock. The Silvergate prepayment was fully funded using proceeds from the sale of Shares. This was MicroStrategy’s largest BTC purchase since November 29, 2021. MicroStrategy entered a Sales Agreement with Cowen and BTIG in September, enabling them to issue and sell shares with an aggregate offering price of up to $500m. MicroStrategy issued and sold $46.4m worth of Class A shares in Q4 2022 to acquire 2,500 BTC. They issued and sold an additional $339.4m worth of shares in Q1, 2023. Per the Sales Agreement, MicroStrategy may issue and sell a further $114.2m worth of shares to acquire BTC. Thus, while MicroStrategy managed to prepay its Silvergate loan at a 25% discount, the market is pricing in that a known large buyer has less short-term gunpowder left to generate upside momentum. Below, we illustrate the BTC performance during periods when MicroStrategy acquires BTC. On average, BTC has delivered a 6.2% positive return during MicroStrategy VWAP purchasing periods. An expected observation as these VWAP orders represent a significant constant buyer in the market.
MicroStrategy bitcoin purchases graph1
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The market dislikes major MicroStrategy BTC purchase announcements
Monday’s adverse market reaction following MicroStrategy purchase announcements is typical, as BTC’s daily return is averaging at -2.2% on MicroStrategy announcement days. The average 7-day return is more balanced at -0.2%. As elaborated above, this market reaction may be caused by market participants absorbing the information that a known large buyer has finished, meaning less buy-side liquidity to support further upside.
MicroStrategy bitcoin purchases graph2
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