Is the expansion of Strategy's selling scale bullish or bearish?

Author: Blockchain Knight; Source: X, @Knight_in_Block

The news disclosed by Strategy yesterday has affected the market to some extent. In just one week, it sold 3,588 bitcoins, cashing out approximately $216 million.

This is also the largest cash-out since the company launched its Bitcoin strategy in 2020.

As soon as the news came out, market sentiment split; pessimists viewed it as bearish, while optimists considered it just normal financial adjustment. But in my view, the core essence of this sell-off is precisely Strategy's self-rescue under financial pressure.

But from a broader cyclical perspective, the loosening of this whale's monopoly position may instead trigger the positive effect of 'a whale falls, everything thrives,' which is not necessarily a bad thing for Bitcoin's long-term trend.

Strategy's traditional main business is software, but the cash flow generated by this part is very limited and cannot support its huge capital game. After all, Strategy's annual dividend expenditure on preferred stock alone is as high as $1.5 billion.

In the past year, MSTR's stock price has plummeted by about 75%, which means that the attractiveness of raising funds through new stock issuance has been exhausted.

In the second quarter, the company recognized a digital asset loss of $8.32 billion. Although it has $2.5 billion in cash reserves, this money simply cannot last long in the face of fixed high interest costs each year.

After the tentative sale of 32 bitcoins at the end of May, facing a new settlement period, the company had to expand the scale of sales, selling more bitcoins to pay dividends.

Strategy's past business narrative of only buying and never selling has been rewritten. Bitcoin's function on its balance sheet has evolved from strategic reserves to a piggy bank for maintaining liquidity.

After the sell-off announcement, a wave of panic emerged in the market, and Bitcoin once fell to around $62k. However, it is unnecessary to conclude that Strategy is going to liquidate and dump. From the perspective of its operational logic, this is more like a flexible adjustment within the system.

By periodically selling a small portion of Bitcoin to pay interest and dividends, it maintains this capital closed loop from breaking.

Strategy still holds 840k bitcoins, and this sell-off accounts for only about 0.4% of its total holdings, and it remains the largest corporate Bitcoin holder globally.

For a long time in the past, Strategy has played the role of a 'single whale' in the crypto market. A highly decentralized asset, yet its top holdings are highly concentrated in the hands of a few single Wall entities, which itself is the Sword of Damocles hanging over Bitcoin.

As Strategy actively breaks its vow of 'never selling Bitcoin' and incorporates Bitcoin into routine liquidity management, it is also a dilution of extreme systemic risk.

The current selling pressure can be fully absorbed by the market naturally; these chips that are being spit out can flow into more diversified institutions, ETF holders, and retail investors.

If the selling continues, it can to some extent mitigate the risk of a single entity. This cash-out also extends the time dimension, allowing the market to adapt to its liquidity, thereby reducing potential future stampedes.

Therefore, this is by no means the end of Bitcoin. On the contrary, the whale's phased decompression, returning chips to the market, actually optimizes the market's holding structure.