Key Insights
- •MicroStrategy (MSTR) stock has dropped over 21% in 30 days even as Bitcoin holds firm above $100K.
- •Continuous share sales and weak money inflows are keeping investor confidence low despite new Bitcoin buys.
- •Heavy exposure to Bitcoin’s price makes the crypto stock more volatile, limiting upside until buying pressure returns.
MicroStrategy (MSTR) stock price has kept falling even as Bitcoin stays strong. Over the past month, Bitcoin dropped about 3.2%, but the crypto stock fell more than 21%. The company has continued to buy the cryptocurrency.
Just last week, MicroStrategy bought another 487 BTC for about $49.9 million, paying roughly $102,557 per coin. This acquisition brings its total holdings to 641,692 BTC, currently worth nearly $47.5 billion. Despite this significant addition to its Bitcoin reserves, the stock has remained weak.
Here are three primary reasons why MicroStrategy's stock is declining while Bitcoin remains stable.
Money Is Leaving MicroStrategy (MSTR) Stock
An initial indicator of this trend comes from money flow data. The Chaikin Money Flow (CMF) indicator is used to determine whether funds are entering or leaving a stock.
When the CMF remains below zero, it signifies that investors are withdrawing capital from the stock. For MicroStrategy stock, the CMF has consistently stayed negative since the beginning of October.
This trend indicates that traders have been selling the stock rather than buying it. Even though the company continues its strategy of acquiring Bitcoin, new investment is not flowing into its shares.
Consequently, investors do not perceive the crypto stock as an effective avenue for gaining exposure to Bitcoin at this time.
Many investors now prefer to purchase Bitcoin directly. Until the CMF indicator turns positive again, the MSTR stock price is likely to remain under pressure.
More Shares Mean Lower Value
MicroStrategy frequently raises capital by issuing new shares or convertible notes, which are then used to acquire more Bitcoin. However, when a company issues additional shares, the value of existing shares is diluted.
Convertible notes are essentially loans that have the potential to be converted into shares in the future, meaning an even larger supply of shares could eventually enter the market.
An increase in supply coupled with a decrease in demand typically leads to a decline in prices.
Investors are concerned that the company is allocating excessive capital to Bitcoin purchases without generating sufficient returns from its core business operations. Therefore, while new Bitcoin acquisitions may seem bullish, the method of funding these purchases is weakening the MSTR stock price.
Too Much Dependence on Bitcoin Price
MicroStrategy's current holdings exceed 641,000 BTC, valued at approximately $47.5 billion. This substantial reserve gives the company significant exposure to fluctuations in Bitcoin's price.
When Bitcoin experiences an upward trend, the crypto stock can often see amplified gains. Conversely, when the cryptocurrency declines, the associated losses can also be magnified.
This dynamic means that the MSTR stock reacts more dramatically to price movements than Bitcoin itself. A minor dip in Bitcoin's value can have a disproportionately larger negative impact on MicroStrategy's stock.
As a result, many traders opt to hold Bitcoin directly rather than investing in the company's shares. Consequently, even if Bitcoin maintains its position above $100,000, the MicroStrategy stock price can still decline if buyers remain hesitant.
MicroStrategy Stock Price Levels To Watch
As of the latest update, MSTR stock was trading near the $219 level, which represents a key support point. A breach below this level could lead to increased selling pressure.
For any significant recovery to occur, the stock price must first break above the $276 resistance mark. A more robust rally might only commence if it surpasses $367, a level where previous rallies have faltered.
The CMF indicator continues to signal weak inflows, indicating that capital is not yet returning to the stock. Until this trend reverses, the MicroStrategy stock price is likely to remain stagnant or drift lower, even if Bitcoin holds its ground.
Bitcoin has shown resilience, but the MSTR stock price continues to slide. The contributing factors are evident: declining investor interest, the issuance of additional shares, and the company's excessive reliance on Bitcoin's price performance.
Unless there is a resurgence in new capital inflows and the company moderates its debt financing or share issuance, MicroStrategy stock will struggle to regain value.
Traders seeking Bitcoin exposure are likely to continue prioritizing direct Bitcoin ownership over MSTR shares for the time being.