Does the dumping of bitcoin-backed shares have effect on BTC's price?

[pawel7777]

On the back of another topic which I started earlier today 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.

[adaseb]

I don’t think it would have an effect because he sold those shares and someone else took over so it should be balanced just as before.

The shares aren’t destroyed when he sells the ownership is just transferred. So I am assuming there would be no effect on the price of bitcoin. However I am not an expert when it comes to equities so I might be wrong here. Maybe someone else can chime in and explain.

[Cryptoprincess101]

Does the selling of bitcoin-backed shares directly affect bitcoin's price at all?

I don’t think it would have an effect because he sold those shares and someone else took over so it should be balanced just as before.

Definitely, but at the initial stage I assume it is gonna have some impact on the price because when it is sold it is believed that something huge has left, so after some corrections are made that is when the system will recognize that another person has the shares already in their custody then the balance may occur. Just an assumption anyway

[Sebas.tian]

I think, it will affect in the price of Bitcoin because we know that supply and demand are the major things that can change the market price, and for such popular shareholders to dump his Bitcoin in the market, show that it will affect the market price. Since, there are many companies in the world who has invested a huge amount of capitals in Bitcoin and whenever they release their Bitcoin for sale, it will make the price to decrease for holders to begin to see the reason of the decrease in the market. But if the companies continue holding their Bitcoin for a long period of time, the market price will be displaying for holders to begin to experience increases in the market and start making income from the market.

[pawel7777]

I don’t think it would have an effect because he sold those shares and someone else took over so it should be balanced just as before.

The shares aren’t destroyed when he sells the ownership is just transferred. So I am assuming there would be no effect on the price of bitcoin. However I am not an expert when it comes to equities so I might be wrong here. Maybe someone else can chime in and explain.

That was my initial thought, but considering from another angle, such shares (I'm not necessarily talking about MSTR here, but about a hypothetical company) would essentially be representing bitcoins, so my instinct tells me there should be an impact.

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).

Definitely, but at the initial stage I assume it is gonna have some impact on the price because when it is sold it is believed that something huge has left,

Sure, but that's a psychological effect, and I'm more interested in raw supply/demand market mechanisms.

[STT]

The company itself matters, a company can be a seller as much as a person, a trust any entity but stocks being sold by a CEO like that is fairly normal.  Problem its not especially correct to only hold one thing, if all his fortune is biased to just 1 share thats a pretty risky place to be for the wealth across your life time because who knows what happens.

I dont see its got a wider implication really unless there is additional information.   Often anyone capable of insider dealing is restricted on the time table they are allowed to sell ahead of news releases etc.  so it becomes about legal time table and investment portfolio and people guess the rest.

[davis196]

On the back of another topic which I started earlier today 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.

When it comes to Bitcoin, all news and gossips that are somewhat related to Bitcoin can have a short term influence over the BTC price.
Some traders could interpret such news as FUD and start selling. Other traders could interpret the news in a different way and start buying.
When it comes to the stock shares of a particular company, the answer is more like "it depends". Imagine Elon Musk sells all his Tesla stocks. The price of the Tesla stocks would most likely drop severely for a while and recover afterwards. Now let's imagine that Elon Musk sells all his Tesla stocks to a buyer, who is willing to pay a higher price. This would most likely boost the market cap of Tesla Motors in the short term.

[retreat]

Does the selling of bitcoin-backed shares directly affect bitcoin's price at all?

This will not have an effect on the price of Bitcoin, because when someone sells their shares, someone else will buy them, so the value of the shares will not fall. However, it is different if a company that has bitcoin-backed shares goes bankrupt or top-level management decides to sell some of their Bitcoin to save the company's liquidity, it may have a direct effect on the price of Bitcoin. And it also depends on how much Bitcoin they sell, if it's not too much, then it doesn't have a significant effect.

[TimeTeller]

Does the selling of bitcoin-backed shares directly affect bitcoin's price at all?

This will not have an effect on the price of Bitcoin, because when someone sells their shares, someone else will buy them, so the value of the shares will not fall. However, it is different if a company that has bitcoin-backed shares goes bankrupt or top-level management decides to sell some of their Bitcoin to save the company's liquidity, it may have a direct effect on the price of Bitcoin. And it also depends on how much Bitcoin they sell, if it's not too much, then it doesn't have a significant effect.

That's the good thing about this market.
Supply and demand will always be there because a lot of people are seeing this as an opportunity to accumulate their satoshis.
Besides, you need a significant amount of btc before it can truly create an impact in this market.
So one stakeholder selling its btc-backed shares won't cripple this market. It is actually a good chance to collect their stash.

[pawel7777]

This will not have an effect on the price of Bitcoin, because when someone sells their shares, someone else will buy them, so the value of the shares will not fall. (...)

But isn't it like saying that dumping bitcoins would have no impact on the price because someone else will buy it, so it's just a change in ownership (which is obviously not true)?
Aren't the shares of the company, in the scenario laid out in the first post, essentially "wrapped" bitcoins (wrapped as shares)?
I already pointed out one mechanism of how the price could be affected in my post above. Just wondering if there's anything more to it that I'm missing.

[kentrolla]

No, this won't affect the price of Bitcoin as they are not selling it for lower price as they are just selling it and there is a buyer already in place to buy those shares hence it won't have any affect on the price of Bitcoin but yes this might create slight panic in the market and make people think unnecessarily why he would have sold these shares which leads to fuds apart from this I don't find any logical reason to conclude this affects bitcoin's price.

[dothebeats]

Why would it cause a dump in bitcoin anyway? Someone still bought those shares and MicroStrategy is still in business, not selling their bitcoins at all. If MS were to sell their coins after Saylor left, then that can potentially affect bitcoin as a whole. Then again, nothing of that magnitude happened. Besides, the guy is still into bitcoins. Whatever happened with him and the company, it's got nothing to do with bitcoin and will not affect it, that's for sure.

[pawel7777]

No, this won't affect the price of Bitcoin as they are not selling it for lower price as they are just selling it and there is a buyer already in place to buy those shares hence it won't have any affect on the price of Bitcoin but yes this might create slight panic in the market and make people think unnecessarily why he would have sold these shares which leads to fuds apart from this I don't find any logical reason to conclude this affects bitcoin's price.

I was mostly talking about hypothetical scenario as per the first post, so we can't assume what price they would be sold for and whether or not there's a purchase agreement in place. I just wanted to discuss market mechanisms.

But in respect of Saylor's specific situation, then I guess, since he sold his shares to Microstrategy itself, it shouldn't have made any dent on the company's market cap (psychological impact on the market aside). Buying own shares by the company would mean there are fewer shares in circulation which would be balanced by lower reserves (lowered by the amount they paid for shares), so the net effect should be none.