Bitcoin’s break with tech widens after strategy’s sale feeds rout

[MUMBAI] Bitcoin’s sell-off extended into Wednesday (Jun 3) after Strategy’s sale of a tiny portion of its massive cryptocurrency stockpile rattled sentiment and widened the token’s divergence from record-setting technology shares.

The largest cryptocurrency fell as much as 3.1 per cent to US$65,391 in Singapore, deepening a drop that has this week erased about US$160 billion in market value. The slide began earlier in the week after Strategy sold about US$2.5 million worth of Bitcoin from a holding valued at over US$60 billion.

The sale was tiny by almost any financial measure, just 32 tokens from its 843,706-coin hoard, but it punctured the market’s belief in chairman Michael Saylor’s long-standing “never sell” stance, said Rajiv Sawhney, head of international portfolio management at Wave Digital Assets.

“Strategy selling 32 BTC for US$2.5 million is financially trivial, a rounding error against its US$62 billion position,” Sawhney said. “What it signals to the market, given Bitcoin’s underperformance in recent weeks, matters more.”

Bitcoin’s weakness contrasts sharply with the latest leg higher in equities. The Nasdaq 100 Index climbed to a record high on Tuesday, underscoring a growing divergence between the original cryptocurrency and technology stocks. Bitcoin was once treated by many investors as a high-beta proxy for tech, but that relationship has weakened since a market crash in October last year.

The rotation has been especially stark as artificial-intelligence stocks continue to attract capital. The Nasdaq 100 is up 41.5 per cent over the past 12 months, while Bitcoin is down 37 per cent and sits 48 per cent below last year’s peak.

“We have been rotating some capital from Bitcoin and digital assets into AI equities,” said Carney Mak, a partner at FXHB Asset Management. “AI currently offers a more compelling risk-reward profile relative to digital assets, which has led some investors to rebalance portions of their portfolios.”

Crypto currently lacks a strong near-term catalyst, Mak said, with performance increasingly range-bound and dependant on liquidity and macro conditions. Some crypto-related initial public offering plans have also been delayed, while AI companies continue to draw investor demand and market momentum, he said.

Nasdaq-listed K Wave Media last month announced it will abandon plans to deploy roughly US$500 million into Bitcoin and instead redirected most of the capital towards AI data centres, GPU infrastructure and related acquisitions. Meanwhile, crypto miner Bitdeer liquidated its entire Bitcoin treasury to fund expansion into AI and high-performance computing businesses.

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ETF outflows

The pressure is also visible in fund flows and derivatives. Investors have pulled nearly US$4 billion from US-listed Bitcoin exchange-traded funds over the past 12 sessions – a record streak of consecutive outflows – according to data compiled by Bloomberg. About US$1.6 billion in bullish crypto positions in perpetual futures have been wiped out over the past 24 hours, Coinglass data show.

For a market built in part on the belief that its biggest holders would keep accumulating, Strategy’s modest sale has taken on outsized importance. The concern now is whether the disclosure has altered the psychology underpinning one of the token’s most important support stories.

There is also the concern that pressure on Strategy may not stay confined to its own shares, which are down 14 per cent this week and more than 70 per cent from their peak.

Leveraged and income funds tied to Strategy shares, including MSTU, MSTY and MSTX, could face amplified volatility if investors begin questioning the sustainability of the company’s accumulation strategy, said Pratik Kala, a portfolio manager at Apollo Crypto, a digital-asset hedge fund. Because many of these vehicles are designed to magnify daily moves in Strategy’s stock, MSTR, even a modest decline in confidence could trigger outsized losses and force portfolio rebalancing.

“It’s a vicious feedback loop,” said Kala. “The decline in MSTR is hitting the exchange-traded funds built around it, including MSTY, MSTU and MSTX. As losses mount, investors pull money from those funds, further souring sentiment towards the broader MSTR trade.” BLOOMBERG