Financial instruments backing institutional companies’ Bitcoin reserves may create selling pressure on certain dates.
Matthew Sigel, head of digital asset research at VanEck, shared a list of how companies use their Bitcoin reserves. This list provides information on Bitcoin’s position in companies’ capital structures. Companies may be forced to sell Bitcoin to fulfill financial obligations such as paying off debts or distributing dividends.
Corporate Finance and Bitcoin Selling Pressure
Many companies use convertible bonds, preferred shares, and loan facilities to finance their Bitcoin reserves. These financial instruments come with specific maturity and dividend dates and may require companies to sell Bitcoin. For example, Bitdeer completely emptied its Bitcoin treasury in February to invest in AI data centers. This move resulted in the company withdrawing 943.1 $BTC from its reserves.
Another example is Strategy, a company that uses its Bitcoin reserves as part of its capital structure. In May, the company sold 32 $BTC to fund dividend payments. This sale was linked to a drop in Bitcoin prices and a decline in STRC shares. As of July, STRC shares are trading 15% below their face value.
Future Scenarios and Market Impacts
In the coming years, corporate debt and preferential financing obligations will intensify. In a positive scenario, if Bitcoin prices rise and capital markets reopen, companies could refinance their debt and Bitcoin sales could remain limited. However, in a negative scenario, weakening Bitcoin prices and financing difficulties could force companies to sell more Bitcoin. In this case, the market supply could increase significantly, putting downward pressure on Bitcoin prices.
JPMorgan states that this new sales policy poses a two-pronged risk to Bitcoin markets. Onramp Institutional estimates that 83% of STRC shares are held by individual investors. This situation could lead to potential volatility in Bitcoin markets.