Bitcoin’s Recent Decline: A Mixed Bag of Blame

Recently, Bitcoin saw a significant drop, attributed by Michael Saylor, chair of Strategy, to the surge in AI spending. However, the investment firm Arca disagrees and points the finger back at Saylor himself.

In a weekly update, Jeff Dorman, Arca’s chief investment officer, asserted, “The selling pressure last week was clearly fueled by the news surrounding Saylor and MSTR,” insisting that this perspective challenges what’s often labeled as “gaslighting” from Saylor and other Bitcoin advocates.

The leading cryptocurrency fell nearly 14% last week, hitting around $60,000 after Strategy disclosed on June 1 that it had sold 32 BTC just before. Despite this sale, the company still holds a whopping 845,256 BTC, valued in the billions.

Saylor believes the sell-off is linked to a massive influx of capital into AI infrastructure, claiming, “The build-up of AI is absorbing capital on a historic scale, creating temporary pressure across global markets. It does not weaken Bitcoin; rather, it strengthens the argument for rare and liquid digital capital. Bitcoin remains the best long-term asset.”

Arca, however, isn’t convinced.

Dorman’s view is rather clear: the market’s downturn wasn’t about just 32 BTC being sold, valued at around $2.5 million. Instead, it hinted that Strategy might need to divest much more Bitcoin to meet its cash dividend obligations for preferred stock, including STRC.

Over the past three weeks, Dorman argues that Saylor has made significant missteps. He’s used his cash reserves to pay off zero-coupon debt, creating turbulence in the market by signaling a possible $2.5 million Bitcoin sale—barely enough to cover one month’s preferred dividends. Currently, Strategy appears to have roughly five months of cash flow remaining, leaving many to wonder what might happen next.

Possible Recovery Scenarios

Dorman thinks there’s a way to quickly stabilize matters. If Saylor were to announce via an 8-K filing that Strategy had secured between $2 billion and $4 billion from selling MSTR stock and Bitcoin, he believes this would cover preferred dividends through September 2028. It could alleviate concerns about forced selling, giving Bitcoin some much-needed space to breathe.

However, Dorman isn’t optimistic about this happening.

“Mr. Saylor seems fixated on acquiring more Bitcoin,” he noted, implying that a more probable outcome is ongoing monthly sales, just enough to meet dividend obligations, which would exert continuous pressure on the market.

“When the world’s largest buyer becomes a forced seller, the market will remain under stress until it bleeds,” he remarked.

Market Dynamics

Remarkably, Dorman observed that last week’s decline initially impacted only Bitcoin, without immediately dragging the broader market down, suggesting a maturing market.

Bitcoin’s dominance, or its share of the overall cryptocurrency market, dropped for the second consecutive week, falling below 58%—a level not seen since September.

He pointed out that while Bitcoin struggled early in the week due to its specific news, other crypto assets remained stable. This indicates that investors are beginning to assess each digital asset based on its unique risks, rather than reacting collectively whenever Bitcoin falters.

“If BTC can decline on its own negative news without pulling down the whole market, it would further demonstrate that participants in the digital asset market are becoming more sophisticated,” he suggested.

Nevertheless, as the week progressed, Bitcoin’s slide deepened, resulting in a downturn for most other assets as well.