MicroStrategy selling coins without a drop, is the STRC rebound really good news?

Author: SpecialistXBT

The silent market is frightening.

The weekly trading volume of BTC has dropped to its lowest level since 2023. Deribit's BTC volatility index DVOL also hit a low last week.

Liquidity is also insufficient. Last night at 20:30, the CPI data was released, and BTC quickly fell from $64,450 to $64,100 at the moment of the CPI announcement, then rebounded to around $64,300 before falling again.

An hour later, the U.S. stock market opened, and BTC participants were few. Aside from the brief capital flow from cross-market arbitrage, the market did not form a new direction. The current BTC price can be easily pushed, but there are not enough traders willing to carry the trend forward.

What the market lacks is not just a piece of good or bad news.

What it lacks is participants.

Options Market

Let's take a look at the options data.

The BTC 25 Delta Skew measures the implied volatility difference between put options and call options with similar Delta. The curves for one month, three months, and six months are all in positive territory, with the one-month term around 12%, three months around 10.7%, and six months around 9.1%. The shorter the term, the higher the skew. Traders' demand for short-term downside protection is clearly higher than the pricing for long-term risks.

The aggregated Gamma heatmap until the end of the month provides more specific price boundaries. Currently, the market is still in the long gamma volatility suppression zone. Market makers buy when prices fall and sell when they rise, and their hedging behavior pulls prices back into the range. The gamma reversal zone is around $61,000 to $60,000. If BTC stays above the boundary, market makers' hedging will absorb volatility; if prices fall below the boundary, positions will shift to short gamma, and market makers will need to continue selling as prices drop, turning their hedging behavior from a decelerator into an accelerator.

If you don't buy, who will we sell to?

Many traders are supporting a bullish judgment with two changes. Saylor has sold hundreds of millions of dollars worth of BTC in batches over the past month, accounting for about 0.13% of the Strategy's holdings, and the BTC price remains roughly flat. On the other hand, STRC has rebounded from a low of around $73 to $95.45, just a step away from $100. Saylor sells coins, BTC does not crash, and STRC has recovered most of its decline, so the market naturally interprets this as bad news being digested.

The problem is that, combined with the current low liquidity and low volatility market conditions, another explanation for the above phenomenon can be given.

Large entities still have spot positions to exit, but the current trading volume cannot support large sell orders. They temporarily stop selling simply because the order book is too thin. Once STRC returns to $100, it will bring buying pressure back to BTC, providing these entities with what may be their last exit opportunity.

Good news will improve selling conditions.

This path can explain why BTC has been consolidating during Saylor's small sell-off, and it can also explain why there is still pressure risk after Saylor resumes buying. The variable that determines the price is how large the Strategy's orders are relative to the potential sell orders in the entire market. Looking only at Saylor's buying or selling does not yield a complete answer.

A reasonable counterargument is that large entities have previously encountered volatility events and Strategy buying pressure; why haven't they completed their exits? The historical trend does not provide an optimistic answer. After the last round of STRC restoring capital flow and Strategy providing spot support, BTC subsequently experienced a rapid decline, closing around $59,000, followed by a long period of consolidation.

The options positions have set the $61,000 to $60,000 range as a volatility amplification zone. Once large spot sell orders push the price into the negative gamma region, the next bottom is expected to form.

The Dilemma of STRC

Recently, Strategy increased its dollar reserves by $650 million and repurchased $109 million of STRC. The company disclosed that these actions will extend the dollar reserve coverage period by 143 days to 2.7 years and narrow the Bitcoin credit spread of STRC by 10 basis points. If the operations from the previous week are included, the two-week repurchase scale is about $190 million.

This money has pulled STRC back to $95 but has not solved the most critical issue.

STRC must return to $100.

Strategy will issue more STRC at market price through ATM near $100. This is equivalent to telling the market that as long as the stock price approaches $100, the company will issue more new shares. Thus, all holders who bought below $100 will sell around $99.9, and even if the STRC price reaches $100, it will immediately be sold back below $100 by these people; shorts can also sell borrowed shares around $99.9 and buy them back when the price drops back to $95, earning about a $5 price difference.

The biggest risk of this transaction is that STRC continues to rise after breaking $100, forcing shorts to cover at a higher price. However, Strategy's own increase in supply near $100 actively suppresses this portion of the upside. The more the market believes the company will issue more shares at $100, the more traders are willing to sell early at $99.9, making it even harder for STRC to truly stand above $100.

As long as this rule remains unchanged, if the $190 million repurchase still cannot bring STRC back to $100, the market will continue to question where the next funds for purchasing STRC will come from, and concerns about BTC monetization will also rise. Strategy is simultaneously supplementing dollar reserves and repurchasing STRC, indicating that the company currently prioritizes repairing the financing side, while restoring net BTC purchases is still secondary.

Shorting is not a free transaction either. Shorts need to borrow STRC first and then sell it in the market, during which they must pay an annualized borrowing rate of over 50% and compensate for about 12% in dividends, totaling an annualized cost of over 60%. If the stock price stays near $100 for a long time, the longer it stays, the more these costs eat into profits.

Because STRC will issue more shares to dilute the upside potential, shorts rarely need to face losses from sustained price increases. If Strategy stops issuing STRC at $100, and STRC rises from $99.9 to $102 to $105, shorts will immediately face a paper loss of $2.1 to $5.1 per share. Some shorts may have to buy back STRC to stop losses, and their buy orders will continue to push prices higher, creating a short squeeze.

The borrowing cost determines how long shorts can hold, while Strategy's issuance rules determine whether they need to stop losses early. As long as STRC begins to issue shares at $100, it will attract shorts.

The contradiction in capital allocation has not disappeared. Selling common stock when MSTR's mNAV is below 1 will dilute the per-share value for common stockholders; repurchasing STRC does not increase dividends or repurchase MSTR, providing more direct protection for preferred shareholders. The company sees a longer dollar reserve coverage period and a narrower Bitcoin credit spread, while common stockholders calculate who bears the cost of this repair.

Bitfinex Long

Bitfinex Long typically changes inversely with BTC prices. When BTC falls, large long positions on Bitfinex often increase; when BTC rises, these long positions gradually decrease. The market tends to view this inverse relationship as a position indicator to observe whether large funds are accumulating BTC in a weak price environment.

Rate of change (inverse) indicator for Bitfinex Long

Recently, this indicator has become ineffective. The rate of change for Bitfinex Long has dropped to its lowest level since the end of the 2022 bear market. BTC is consolidating above $60,000, and Bitfinex's long positions have neither increased significantly nor exited significantly, failing to provide direction for the next trend.

BTC's "savior" has turned into "Satan."