Altcoins Talks - Cryptocurrency Forum
Crypto Discussion Forum => Cryptocurrency Trading => Cryptocurrency Price Speculations => Topic started by: pawel7777 on April 21, 2024, 01:21:26 AM
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On the back of another topic which I started earlier today (https://www.altcoinstalks.com/index.php?topic=320584) related to Michael Saylor selling his 400k shares in Microstrategy, a question came to mind:
Does the selling of bitcoin-backed shares directly affect bitcoin's price at all?
As a thought experiment, instead of Microstrategy, we could take a hypothetical small (but listed) company that has minimal operations but buys tonnes of bitcoins, to the point that the value of its shares is almost entirely backed by bitcoins and their market price is 100% correlated with bitcoin price.
What happens when a shareholder decides to dump a large amount of such shares on the market? Would that be equivalent to dumping bitcoins? After all, it's just a change in the company's ownership and bitcoins held by the company remain untouched.
both topics are cross-posted with bitcointalk
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What happens when a shareholder decides to dump a large amount of such shares on the market? Would that be equivalent to dumping bitcoins? After all, it's just a change in the company's ownership and bitcoins held by the company remain untouched.
This is a good question and since we are now seeing this thing happening in the market right now, maybe discussing this to further illuminate on the subject can be worth it. As for me, the situation you mentioned above will not have a direct effect on the price of Bitcoin as it is the shares of that company that got sold and is not really the Bitcoin being held by the company in question. Now, will there be a kind of ripple effect on the market that can sway Bitcoin somehow? I think it got something to do with confidence on Bitcoin. Like why would you sell shares of that company if you think that Bitcoin will continue on soaring? This will come into focus with big companies because a move like selling shares will come on the news much more so if there is some connection to Bitcoin.
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(...) As for me, the situation you mentioned above will not have a direct effect on the price of Bitcoin as it is the shares of that company that got sold and is not really the Bitcoin being held by the company in question. (...)
Just to clarify, I only meant pure supply/demand market mechanisms, not the psychological effect (such as losing confidence etc).
Let's try to break it down:
So what would happen if such dump caused the price of shares to go below the price of bitcoin (ie. they would be traded below company's market value)? If the arbitrage could be applied, i.e. new shareholders could force the company to sell bitcoins - then all is clear. But if new shareholders could not make the decision to sell, then the only impact on BTC price would be that some potential BTC buyers would choose to buy cheaper company shares instead (so reducing demand for BTC and causing the price to drop).
I can't think of any other factors.
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(...) As for me, the situation you mentioned above will not have a direct effect on the price of Bitcoin as it is the shares of that company that got sold and is not really the Bitcoin being held by the company in question. (...)
Just to clarify, I only meant pure supply/demand market mechanisms, not the psychological effect (such as losing confidence etc).
Let's try to break it down:
So what would happen if such dump caused the price of shares to go below the price of bitcoin (ie. they would be traded below company's market value)? If the arbitrage could be applied, i.e. new shareholders could force the company to sell bitcoins - then all is clear. But if new shareholders could not make the decision to sell, then the only impact on BTC price would be that some potential BTC buyers would choose to buy cheaper company shares instead (so reducing demand for BTC and causing the price to drop).
I can't think of any other factors.
Arbitrage seems to be very difficult to do because currently you have to look at transaction costs which are quite expensive which will make many traders who use the arbitrage method consider sending assets using bitcoin. If you buy shares in a cheaper company, it seems like only a few people will choose that because the profits they get are less than investing in bitcoin.
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Just to clarify, I only meant pure supply/demand market mechanisms, not the psychological effect (such as losing confidence etc).
Let's try to break it down:
So what would happen if such dump caused the price of shares to go below the price of bitcoin (ie. they would be traded below company's market value)? If the arbitrage could be applied, i.e. new shareholders could force the company to sell bitcoins - then all is clear. But if new shareholders could not make the decision to sell, then the only impact on BTC price would be that some potential BTC buyers would choose to buy cheaper company shares instead (so reducing demand for BTC and causing the price to drop).
I can't think of any other factors.
I think it is normal for Saylor to sell MSTR. The market is maintained by the buying and selling of assets, and Saylor is also an investor. He has the right to sell his shares when he needs to.
This decision could have a temporary negative impact on MSTR price and cause MSTR investors to worry that something negative is about to happen to the stock. However, this decision has no direct impact on BTC and the crypto market because MS has not sold any BTC.
In fact, we can believe that Saylor is selling MSTR to continue accumulating BTC himself, as Saylor is known as BTC diamond hands in the market. This could boost investor confidence and optimism in BTC, giving them more reasons to invest more in BTC, driving up BTC price.
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We have to understand that the price of Bitcoin can be determined by its market capitalization and circulating supply. If ever there was a changes any of them will affect the price. If a company sell Bitcoin, let us say Microstrategy, it will make the price to decrease but the decrease of the price vary on how much the value of Bitcoin they are selling. Sometimes it's a domino effect, when one company sell Bitcoin and the other company saw it, they will also sell Bitcoin and going to reinvest in a lower price.
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We have to understand that the price of Bitcoin can be determined by its market capitalization and circulating supply. If ever there was a changes any of them will affect the price. If a company sell Bitcoin, let us say Microstrategy, it will make the price to decrease but the decrease of the price vary on how much the value of Bitcoin they are selling. Sometimes it's a domino effect, when one company sell Bitcoin and the other company saw it, they will also sell Bitcoin and going to reinvest in a lower price.
Yes, what you say is correct, but the topic mainly talks about the effect of selling stocks backed by Bitcoin and not about selling Bitcoin itself.
Personally, I do not expect that selling shares will have a significant material impact on the price, but of course it will have a significant psychological impact and may cause fud and people will start selling.
As for selling Bitcoin itself, it will not affect the market unless there is a sale of large quantities from several companies and not from one company, because the market value of Bitcoin is enormous and will not be affected by the sale of one company’s holdings.
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We have to understand that the price of Bitcoin can be determined by its market capitalization and circulating supply. If ever there was a changes any of them will affect the price. If a company sell Bitcoin, let us say Microstrategy, it will make the price to decrease but the decrease of the price vary on how much the value of Bitcoin they are selling. Sometimes it's a domino effect, when one company sell Bitcoin and the other company saw it, they will also sell Bitcoin and going to reinvest in a lower price.
Yes, what you say is correct, but the topic mainly talks about the effect of selling stocks backed by Bitcoin and not about selling Bitcoin itself.
Personally, I do not expect that selling shares will have a significant material impact on the price, but of course it will have a significant psychological impact and may cause fud and people will start selling.
As for selling Bitcoin itself, it will not affect the market unless there is a sale of large quantities from several companies and not from one company, because the market value of Bitcoin is enormous and will not be affected by the sale of one company’s holdings.
In my opinion, there are some point that it would affect the price of Bitcoin but most of the time it won't. Just like what I've said, Bitcoin prices only affected when there's a changes in a circulating supply and marketcap. So if Bitcoin's price affected by selling Bitcoin backed shares, probably they are just afraid that the Bitcoin will be the next, especially if this thing always happened in the market. We can make a comparison to news into that.
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Depends, if we are talking about the result being something that causes the bitcoins themselves to be sold as well, then yeah, but if the result isn't bitcoins being sold, then it has nothing to do with it. Simply put, the only thing that drops the price of bitcoin is selling bitcoin, and if you are not selling bitcoin then you are not going to end up with a lower price for bitcoin. In this case, Michael Saylor sold his own shares, to a company, and yes that company does buy bitcoins, but that doesn't mean that just because we are dealing with something like this doesn't mean that we are going to see them sell bitcoins neither.
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Depends, if we are talking about the result being something that causes the bitcoins themselves to be sold as well, then yeah, but if the result isn't bitcoins being sold, then it has nothing to do with it. Simply put, the only thing that drops the price of bitcoin is selling bitcoin, (...)
Correct, but in the above scenario, as I mentioned above, new shareholders (who bought the cheap shares below their net asset value) could vote for the company to sell bitcoins, giving them a quick profit. The other mechanism: investors wanting exposure to bitcoin could choose to buy cheaper bitcoin-backed company stocks instead of actual bitcoin, the shift in demand from bitcoin to stocks, would affect BTC's price.
Such bitcoin-backed stocks would effectively be the same as i.e. bitcoin spot ETFs.
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Depends, if we are talking about the result being something that causes the bitcoins themselves to be sold as well, then yeah, but if the result isn't bitcoins being sold, then it has nothing to do with it. Simply put, the only thing that drops the price of bitcoin is selling bitcoin, (...)
Correct, but in the above scenario, as I mentioned above, new shareholders (who bought the cheap shares below their net asset value) could vote for the company to sell bitcoins, giving them a quick profit. The other mechanism: investors wanting exposure to bitcoin could choose to buy cheaper bitcoin-backed company stocks instead of actual bitcoin, the shift in demand from bitcoin to stocks, would affect BTC's price.
Such bitcoin-backed stocks would effectively be the same as i.e. bitcoin spot ETFs.
Do you know that no matter any amount being sold it would not affect bitcoin price but if that company are directly holding back bitcoin as a store of value doesn't relatively reflects to the price of bitcoin although there would be some price changes but it may not entirely effects the market therefore whomever that sold theirs shares in a company doesn't effect the company positively rather negatively if the company doesn't established before someone pull out their investment.
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Depends, if we are talking about the result being something that causes the bitcoins themselves to be sold as well, then yeah, but if the result isn't bitcoins being sold, then it has nothing to do with it. Simply put, the only thing that drops the price of bitcoin is selling bitcoin, (...)
Correct, but in the above scenario, as I mentioned above, new shareholders (who bought the cheap shares below their net asset value) could vote for the company to sell bitcoins, giving them a quick profit. The other mechanism: investors wanting exposure to bitcoin could choose to buy cheaper bitcoin-backed company stocks instead of actual bitcoin, the shift in demand from bitcoin to stocks, would affect BTC's price.
Such bitcoin-backed stocks would effectively be the same as i.e. bitcoin spot ETFs.
Do you know that no matter any amount being sold it would not affect bitcoin price but if that company are directly holding back bitcoin as a store of value doesn't relatively reflects to the price of bitcoin although there would be some price changes but it may not entirely effects the market therefore whomever that sold theirs shares in a company doesn't effect the company positively rather negatively if the company doesn't established before someone pull out their investment.
I literally explained how selling bitcoin-backed shares could affect Bitcoin's price in the very post you quoted, so not entirely sure why would you think it wouldn't (if I understand your post correctly).
It's not much different from trading Bitcoin spot ETFs, that also have an effect on BTC's price.
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We have to understand that the price of Bitcoin can be determined by its market capitalization and circulating supply. If ever there was a changes any of them will affect the price. If a company sell Bitcoin, let us say Microstrategy, it will make the price to decrease but the decrease of the price vary on how much the value of Bitcoin they are selling. Sometimes it's a domino effect, when one company sell Bitcoin and the other company saw it, they will also sell Bitcoin and going to reinvest in a lower price.
Yes, what you say is correct, but the topic mainly talks about the effect of selling stocks backed by Bitcoin and not about selling Bitcoin itself.
Personally, I do not expect that selling shares will have a significant material impact on the price, but of course it will have a significant psychological impact and may cause fud and people will start selling.
As for selling Bitcoin itself, it will not affect the market unless there is a sale of large quantities from several companies and not from one company, because the market value of Bitcoin is enormous and will not be affected by the sale of one company’s holdings.
You are right, but don't you think that the sale of bitcoin from a big company can trigger other companies and individuals to sell, and it is those who are looking up to that big company to invest in bitcoin. Back to the topic, I don't think that selling a share will affect the price of bitcoin, because bitcoin is bitcoin and shares are shares. They don't have connection even though they are backed up with bitcoin. Nobody will sell their bitcoin because MSTR sold their shares, only dumb people will do that.
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I do agree that if the new shareholders "force" the company to sell then it would be a bad thing, but I do not know if this is voting power shares, or just regular stock shares. I believe that the best thing to do right now would be something that will take a while. Plus, even if they sell, there are other big companies waiting to buy wholesale too. You think big companies like lets say Blackrock just opens up a coinbase account and buy there like us? Of course not, they buy in thousands, which means that they buy wholesale OTC, and these type of stuff would benefit them, so there doesn't seem to be much trouble for the market if you ask me.
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Yes, from what i can sense, all these will now count on determining for bitcoin market price, since the are also looking forward to see the way the market flows, they can try to engage on some nasty risk whereby they distort the market demands by investing on bitcoin with huge sum or selling off their investment to make the market changes for some time, a good example was the aftermath of bitcoin spot ETF approval earlier this year.
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Plus, even if they sell, there are other big companies waiting to buy wholesale too. You think big companies like lets say Blackrock just opens up a coinbase account and buy there like us? Of course not, they buy in thousands, which means that they buy wholesale OTC,
I'm not sure how these companies communicate with each other, but I bet one of them will know beforehand if someone will flood the market with huge sales pressure. They can follow them by selling their shares too, or they can buy and absorb some pressure as you mentioned above. Besides, there's no need to speculate when every bear market comes so many companies sell their holdings too. At the end of the day, they will try to offload their loss to retail as fast as possible. Even if they sell it through OTC, it will affect the retail market sooner or later since rumors will circulate. It doesn't take that much to spread FUD afaik. CMIIW.
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I agree, that type of communication is how whales get rich, first you do it then I do it and we make money. When there is one that has thousands and thousands of bitcoins, the other goes and shorts a lot of bitcoin, so when the one with thousands sells and publishes news that they are selling, price crashes and the one who shorted makes all the money in the world. All they do is switch up the places and that's it, nothing more and that's why its quite normal for this to happen. I believe that the best thing to do is just avoid thinking about what whales do, and just invest for the long term without caring.