A recent analysis published by analysts at The DeFi Report examines whether a significant “regime change” is occurring in Bitcoin and the broader cryptocurrency market.

Although Michael Saylor, founder of MicroStrategy (Strategy), generated excitement in the market with his large-scale purchases, macroeconomic data is urging investors to exercise caution.

Michael Saylor made his first ever large-scale capital injection into the market during a bear market, purchasing approximately $3 billion worth of Bitcoin. This purchase was financed through MicroStrategy’s new “STRC” fixed-income financial product. Analysts note that this product, offering a high dividend yield of 11.5%, provides a breath of fresh air during a bear market, but could pose a significant risk if the Bitcoin price falls below this yield.

How Saylor financed this acquisition is being described by market experts as “crazy financial engineering.” Having struggled to raise capital in previous bear markets (particularly in 2022), Saylor this time managed to raise approximately $4 billion with a new fixed-income financial product called STRC (Strategy Fixed Yield).

Analysts point out that Saylor hasn’t been this aggressive in past bear markets, usually limiting his purchases to cash flow from his software business. However, the $1.2 billion and $1.57 billion purchases in the last two weeks respectively indicate that MicroStrategy is shifting gears in its strategy.

According to analysts, a sharp drop in Bitcoin price could cause the STRC product to fall below its value and prevent Saylor from raising new capital. Furthermore, because Bitcoin itself does not generate yield, the risk of dividend payments being financed through new capital issuances raises questions about the system’s sustainability.

While Saylor’s purchases aren’t directly driving the price up right now, they continue to instill “institutional confidence” in retail investors. Analysts note that despite these large purchases, if Bitcoin fails to break through the $80,000-$85,000 resistance zone, the market may remain structurally weak.

Since the start of geopolitical tensions with Iran, Bitcoin has displayed a surprising performance, gaining 17% in value. During the same period, the NASDAQ technology index fell by 1%, while gold lost 4.2%. This indicates that Bitcoin has strengthened its perception as a “safe haven” in the short term.

Experts are comparing the current situation to the start of the Russia-Ukraine war in 2022. At that time, Bitcoin experienced a similar surge, but this increase was merely a “relief rally” lasting only two months. The analysis suggests that the current rise is more likely a counter-trend rally within a bear market, rather than a sustained bull season.

The liquidity cycle in the US appears to have peaked and is now beginning to retreat. While China is injecting liquidity into the market, the contraction in the US is expected to put pressure on risky assets like cryptocurrencies.

In the US, producer price index (PPI) came in higher than expected (3.4%). With rising oil prices, the possibility of a Fed interest rate cut is said to have been completely dismissed by the markets. According to the analysis firm, the $85,000 level, which is the cost floor for short-term investors, is seen as the strongest resistance point for Bitcoin.

*This is not investment advice.

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