TD Cowen Reports Strategy’s Bitcoin Acquisitions Have Limited Price Impact

TD Cowen’s research shows that Strategy’s significant Bitcoin purchases have a minimal impact on market prices, with only 3.3% of weekly trading volume and weak correlation to price changes. Despite this, Strategy has increased its Bitcoin holdings by 306% this year, generating substantial gains for shareholders and positioned for continued success without disrupting market dynamics.

TD Cowen’s recent analysis indicates that Strategy’s significant investments in Bitcoin (BTC) have had minimal impact on market prices. Over a six-month period, Strategy’s purchases averaged only 3.3% of the weekly trading volume, showing a weak statistical correlation with price movements. Despite acquiring billions in Bitcoin, the findings suggest that Strategy’s continued buying does not sustain BTC values as skeptics may claim.

The research revealed that although Strategy recently raised $842 million by issuing 1.8 million shares to purchase 6,556 bitcoins, these transactions represent just a minor fraction of the total Bitcoin market. Specifically, Strategy’s activity accounted for approximately 8.4% of total trading volume over the past 27 weeks, heavily influenced by a few peak buying weeks.

Additionally, the analysis examined the correlation between Strategy’s Bitcoin purchases and market prices, which revealed a weak relationship with a coefficient of around 25%. This indicates that there is little to no strong link between Strategy’s buying activities and short-term price changes in Bitcoin.

Critics have also argued that Strategy’s purchases exceed Bitcoin mining production, potentially creating upward price pressure. However, the analysis clarified that secondary bitcoin trading has outpaced mining volume significantly, indicating that all participants in the market, including miners, are price takers.

Despite the limited influence on prices, Strategy’s Bitcoin purchasing strategy has yielded substantial shareholder benefits, with their holdings increasing by 306% in 2023. Moreover, Strategy’s recent acquisitions have been projected to generate incremental gains of nearly $600 million.

With ongoing authorisation for share issuance and $1.53 billion ATM capacity, Strategy is positioned to continue its purchasing strategy while maintaining a responsible impact on the market. Analysts suggest the firm will continue positively affecting BTC yield, benefitting shareholders even as yield may decrease with rising Bitcoin prices.