Strategy will have more power than the governments of the world, according to Livingston.
It would have begun the “monopolized absorption” of Bitcoin’s offer.
Strategy (formerly Microstrategy) continues with its aggressive Bitcoin accumulation strategy (BTC) as treasury assets.
From August 2020 to date, the firm that leads Michael Saylor launched a mechanism of aggressive purchases of Bitcoin, to such a point, which today is the central axis of its balance. In fact, Your main activity no longer goes through software solutionsbut by the strategic accumulation of BTC.
As Nikou Asgari, correspondent for digital markets of the Financial Times expressed, nobody cares about the software business because “all this depends on the price of BTC continuing to rise and upload, because the value of Strategy, and the value of all kinds of investments they see in it, is linked solely and exclusively at the price of BTC.”
And the repercussions of this strategy generate different visions that focus on the real role that the company plays in the ecosystem. Is that Strategy no longer acts as a traditional technological company, but as an entity that directly influences the monetary dynamics of BTC. For Adam Livingston, the author of the book The Bitcoin Age“Strategy pretends to be a company, but it is a central bank in the shadow.”
The specialist raises: “Have you heard of black holes in astrophysics? Strategy is one in finances: a recursive capital sink that makes BTC debt with the grace of a coverage background and the soul of a monetary insurgent.”
The comparison with a central bank is because Livingston observes that, when issuing preferential actions or debt to finance constant purchases of the asset, the company is expanding its balance in a similar way to how a central bank would do that prints money to buy assets. As a result, Strategy has a direct impact on the price of BTC, because it not only reduces the available offer, but Saylor ensures that The objective is to adopt a strategy of Hodl In the long term. That is, they are coins that are out of circulation.
This occurs because the currency created by Satoshi Nakamoto has a supply limited to 21 million units, and its broadcast is reduced every 4 years in an event known as halving. It is a factor that directly impacts its medium and long term price.
Here it is interesting to make a stop because, as Cryptonoticias reported, Livingston had commented that Strategy is deploying a kind of “synthetic halving” with the repeated purchases of BTC financed through convertible bonds and retail offers in the secondary market.
This logic responds to a financial model known as «Collateral reflexive FlywheeL »(Self -reforted collateral inertia steering wheel). As seen in the following image, it is a cycle that feeds up as the company issues debt or actions to buy BTC, which reduces the offer available in the market (soak tradable float, or “absorb the negotiable flotation”), raise the price of the asset (Higher BTC Price) and allows more capital to access lower rates (Lower Coupons), thus promoting new financing rounds (Larger Raises).
In that line, the specialist highlights: “Now Bitcoin goes up, not because of the hype, but because there is mathematically less available to negotiate. When Strategy wants Absorbs offer, raises the price, strengthens the collateral and rotates the steering wheel again. ”
However, the difference with the Central Bank is that the objective is not macroeconomic data such as employment, inflation or other figures, the only thing that matters is the price of BTC. “If that number does not behave, the balance will do. It is an unregulated monetary authority. Only it does not devalue your savings, accumulate them. And that is why Strategy will have more power than the governments of the world,” says Livingston.
This is because, according to its vision, the firm is becoming a dominant actor in the market. In this way, it assumes a role similar to that of a monetary authority but without the limitations that the central banks have.
And this is where this structural change appears: it is no longer the markets that determine the price of BTC, but the decisions of a company. Livingston says:
“The next BTC historical maximum will not be established in a coinbase graphic. It will be set during a conversation in the Strategy Board Hall when someone asked: ‘How many coins do we want this quarter?’ And the answer will be: ‘all’. ”
Adam Livingston, the author of The Book The Bitcoin Age and Market Analyst.
In addition, from here another issue follows, because the fact of controlling an important part of the BTC in circulation offer can influence the holdings of millions of people. This represents more power than many governments have today about their own coins. “This is the end of the open market and the beginning of monopolized absorption. And it is being executed, computed, in broad daylight, by a man with a profile photo on Twitter that seems to have seen God and decided to buy more Satoshis,” completes Livingston.
In his thesis, the author proposes to advance a few years, in a scenario where Strategy has 1,000,000 BTC. In this regard, he says: «That is approximately 5% of the total offer. Not of the circulating offer. Total. These are not trading positions. They are not funds quoted in the stock market (ETF) vulnerable to bailouts. It is collateral in cold storage, state-grade monetary weight, sustained by a public company that operates as a self-re-infincted liquidity sink by constant expansion of its preferential stock. Suppose $ 12,000 million issued in preferred shares. Could it be much more than that? Absolutely. And it will be ».
This type of sustained accumulation, backed by traditional financial instruments as preferred actions, represents a deep structural change in the dynamics of Bitcoin’s supply and demand. Unlike ETFs, which allow daily entries and outputs, la Strategy strategy permanently withdraws market liquidity.
In fact, this dynamic resembles how bonds operate around the Federal Reserve, but with a key difference, Livingston believes: “In this case, the” Fed “is not a traditional central bank, but a software company based in Virginia that manages Bitcoin’s monetary policy in its own way and under a calendar that rarely reveals in detail. Thus, the corporate treasury becomes a macroeconomic policy tool, redefining who really determines the price of BTC. Strategy is no longer at the mercy of the market, but, in many ways, it is the one who molds and leads it ».
Through the model called “Crossing The Lines” (“crossing the lines” in Spanish) you can see the impact of Strategy on the market. This dynamic states that, if the daily purchases of BTC by the company (Absorption Line) exceed the offer available in the market (distribution line), composed of miners’ sales, ETF retreats and the offer of traders, a critical point is reached: Strategy begins to set the marginal price of Bitcoin.
This “crossing point” (Crossing Point) occurs when Strategy purchases exceed the offer available in the market. That is the time when the demand promoted by Strategy unbalances the market in its favor. From there, each new BTC is bought at higher prices, further reinforcing the dominant role of the company in price formation.
In this regard, Livingston emphasizes: «When absorption consistently exceeds distribution, the price discovery is over. The offer is structural, it is recursive, and is designed to never reverse ».
To complete his thesis, he reinforces the idea that “every preferred action sold today is an advance of the tomorrow’s supply shock” and uses a forceful metaphor: They are like thermometers that announce an imminent BTC absorption.
Finally, he explains: «That capital will become BTC in cold storage. That BTC will not be sold. And the very existence of that offer will distort each model, will invalidate each trading range and make your RSI graph as useful as Myspace actions in 2012. This is a new monetary axis forming in real time. It is not decentralized. It is not proof-of-stake. It is not controlled by a DAO with a logo designed by a type in Bali called Chad. This is a precision designed capital deployment, with the explicit intention of capturing a terminal percentage of the global monetary base, and doing so before institutions even understand what they are seeing ».
