While Michael Saylor, the chairman of bitcoin-holding firm Strategy, pointed to the AI surge as the cause for last week’s bitcoin downturn, Arca, a crypto investment company, attributes the drop to Saylor's actions.
In a recent note, Arca's Chief Investment Officer Jeff Dorman stated, "The selling pressure last week was clearly due to the Saylor/MSTR news," countering what he describes as "gaslighting from MSTR and other Bitcoin bulls." Bitcoin, the most valuable cryptocurrency, experienced a decline of nearly 14%, dropping to $60,000. This sell-off coincided with Strategy's announcement on June 1 of the sale of 32 BTC in the preceding week, although the firm still retains a significant holding of 845,256 BTC.
Saylor suggested that the recent price drop was a result of increased capital demands for AI infrastructure. He stated, "The AI buildout is absorbing capital at a historic scale, creating temporary pressure across global markets. That does not weaken Bitcoin. It strengthens the case for scarce, liquid, digital capital. Bitcoin remains the premier asset for the long term." However, Arca disagrees with this perspective.
Dorman argues that the market decline was not due to the sale of 32 BTC, worth about $2.5 million, but rather the implications of that sale: it indicated that Strategy might need to sell more bitcoin to fulfill its cash dividend obligations on preferred shares, including STRC. Dorman believes Saylor has made several missteps recently, such as using available cash to settle zero-coupon debt and hinting at the sale of $2.5 million in bitcoin, which is merely sufficient to cover one month’s preferred dividends. He pointed out that Strategy has about five months of cash flow left, leaving uncertainty about future actions.
The Bullish Scenario
Dorman mentions a potential scenario that could quickly restore stability: if Saylor were to announce through an 8-K filing that Strategy had raised $2 to $4 billion by selling MSTR stock and bitcoin, covering preferred dividends until September 2028. Dorman believes this would lead to a market rally, alleviating the pressure from forced selling and providing bitcoin with the space to recover. However, he doubts Saylor will take this route.
He wrote, "Saylor is basically addicted to buying Bitcoin," predicting that the more probable outcome is a continuous pattern of small sales, just enough to meet dividend obligations, which would maintain ongoing pressure on the market. "When the world's biggest buyer becomes a forced seller, the market will keep pressing until there is blood," he added.
The Bright Spot
Interestingly, last week’s bitcoin sell-off was primarily limited to Bitcoin itself and did not immediately affect the broader market, which Dorman interprets as a positive sign of increasing market sophistication. He noted that BTC's dominance rate fell for the second consecutive week, dipping below 58% for the first time since September. Earlier in the week, bitcoin's price drop was attributed to specific news while other crypto assets remained stable, indicating that investors are beginning to evaluate each digital asset based on its unique risk profile rather than selling indiscriminately in response to bitcoin's fluctuations. He commented, "If BTC can move lower on its own idiosyncratic bad news without taking down the whole market, this would be yet another sign that digital asset market participants are becoming more sophisticated." Nonetheless, by the end of the week, the intensity of BTC's sell-off led to a decline across most assets.