MicroStrategy Stock Drops 20% Amid Bitcoin ATH, Technicals Suggest Further Downside

MicroStrategy's stock price has fallen 20% from its year-to-date high, despite Bitcoin reaching a new record high. The company's valuation concerns, saturated Bitcoin treasury industry, short-seller bets, and dilution fears are contributing factors. Technical analysis shows that the stock is at risk of further downside if it loses key support. Analysts forecast a 55% increase in the stock price.

MicroStrategy's stock price has plummeted 20% from its year-to-date high, despite Bitcoin reaching a new record high of $124,420. The company's stock, represented by the ticker MSTR, dropped to $375.80, down from a high of $457 and 30% lower than its highest level in 2024. This downward trend is attributed to several factors, including valuation concerns, a saturated Bitcoin treasury industry, short-seller bets, and dilution fears.

Valuation concerns are a significant factor. MicroStrategy holds 628,946 Bitcoins valued at over $74.78 billion, with an average cost per coin of $73,288. This results in a realized gain of 62% [1]. However, the company's market capitalization of $107 billion has a NAV multiple of 1.428, which has fallen from a peak of 3.31 in November 2024. The $33 billion gap between its current market capitalization and its Bitcoin holdings suggests that the stock is overvalued, leading investors to attempt to close this gap.

The Bitcoin treasury industry has become increasingly saturated, with over 100 companies following MicroStrategy's model to boost their stock prices. This saturation has contributed to the falling premium of the MSTR stock [1].

Short-sellers have also played a role in the stock's decline. SeekingAlpha data shows that the short interest in MSTR has jumped to almost 10%, with prominent short-seller Jim Chanos among those betting against it [1]. The influx of short-sellers has added downward pressure on the stock.

Dilution fears are another factor. MicroStrategy has issued more shares to buy Bitcoin, with its total outstanding shares jumping to 261 million from 78 million in 2022. This dilution has raised concerns among investors [1].

Technical analysis indicates that MSTR is at risk of further downside if it loses key support. The stock has dropped to $367, down by 20% from the year-to-date high. It is approaching the crucial support level at $358, where it has failed to move below since May 28. A drop below this level would confirm a bearish breakout and point to more downside toward $300 [1].

Despite these challenges, analysts remain bullish on MSTR. Yahoo Finance data shows that the average analyst estimate is $569, a 55% increase from the current level [1].

MicroStrategy's aggressive Bitcoin strategy has transformed it into a leveraged proxy for the cryptocurrency. Its stock price is highly correlated with Bitcoin's volatility, making it a high-risk, high-reward investment. For those seeking exposure to Bitcoin's growth without the operational risks of MicroStrategy, Bitcoin ETFs or futures may offer a more diversified path.

References:
[1] https://crypto.news/strategy-stock-crashing-despite-bitcoin-price-hitting-ath-heres-why/
[2] https://www.ainvest.com/news/microstrategy-surges-trump-crypto-policy-5-2b-volume-ranks-11th-largest-2508/
[3] https://www.ainvest.com/news/bitcoin-barometer-microstrategy-accumulation-strategy-signals-institutional-confidence-2508/