- MicroStrategy faced a record 35% market cap drop amid Bitcoin’s correction.
- Retail investors poured $100M into MicroStrategy shares despite ongoing market volatility.
As an analyst with over two decades of experience navigating the tumultuous world of finance and technology, I find myself both intrigued and cautious when it comes to MicroStrategy’s latest market cap plunge. The company’s bold Bitcoin strategy has undoubtedly caught the attention of many, but its recent 35% drop in four days serves as a stark reminder that no investment is without risk.
Previously known for its skyrocketing stock values and daring Bitcoin [BTC] investment approach, MicroStrategy is currently grappling with the sharpest decline in market capitalization over a four-day period that it has ever experienced.
On the 21st of November, the company’s value hit a high point, but since then, it has dropped by over 35%, which translates to a loss of approximately $30 billion in market value.
26th November saw MicroStrategy’s stock (MSTR) experience an additional 12% drop, concluding trade at $353, as the selling activity increased significantly.
This sharp decline has sparked discussions yet again about the potential dangers associated with its high-leverage strategy that primarily focuses on Bitcoin.
MicroStrategy’s stock plunges
Remarking on the same, Kobeissi Letter, took to X (formerly Twitter) and highlighted,
The MicroStrategy stock (symbol MSTR) has experienced a significant drop of approximately 35% since its highest point on November 21st. This decline translates to roughly $30 billion in market capitalization lost over just four trading days.
This occurs when Bitcoin was almost reaching $100,000 in value and currently trades at $93,418.96 according to CoinMarketCap.
Adding further on the matter, Kobeissi Letter added,
Even after a temporary rebound, Mastercard’s (MSTR) shares are still being affected by the persistent downward trend in Bitcoin’s value.
On November 27th, the stock price fell by 7.5% within a 24-hour period, currently standing at $354.10 according to information from TradingView.
Interestingly, retail investors have shown unprecedented interest in MSTR shares.
MSTR stock post-Trump victory
Based on The Kobeissi Letter, it was reported that retail investors purchased a staggering $42 million worth of shares in one day last week, which far surpassed the previous daily record by a significant margin of eight times the average daily amount seen in October.
In case you didn’t know, during the last seven days, numerous individual investors combined to invest a total of 100 million dollars in MicroStrategy. This action indicates increasing trust as market conditions remain unpredictable.
Moreover, during November, there was a significant increase in the relationship between MSTR and Bitcoin. This trend became more apparent after Donald Trump’s election win.
However, despite a sharp 35% correction in MicroStrategy’s stock, both assets maintained impressive monthly gains, each up by 37%.
Therefore, over a broader timeframe, their performance remains robust.
How is Bitcoin and MicroStrategy related?
In the past month, Bitcoin surged 44%, while MicroStrategy posted a 32% rally.
In comparison to Bitcoin’s impressive 146% annual growth, MicroStrategy (MSTR) surged ahead at an astonishing rate of 599%, demonstrating its significant investment in and alignment with Bitcoin’s upward trend.
The prices of MicroStrategy and similar cryptocurrency-linked stocks are strongly linked to Bitcoin’s fluctuations, since many of these companies own the asset or earn income from trading it.
After Donald Trump won the 2016 U.S. election, the surge in Bitcoin’s price picked up speed, but it almost reached the $100,000 threshold before slowing down. This pause was believed to be due to a large number of ‘put options’ being traded at levels below this amount.
Predictably, the recent drop in prices has rekindled criticism from doubters, with Peter Schiff among them, using this moment to emphasize potential weaknesses in Bitcoin and MicroStrategy’s heavy dependence on it.
Schiff wrote,
Four weeks have passed since the company unveiled its three-year strategy to invest a total of $42 billion in Bitcoin. So far, MSTR has invested $10 billion. If this pace continues, it would seem that the three-year plan will be completed within approximately 16 weeks. After the buying spree is over, there may be a potential crash for both Bitcoin and MSTR.
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2024-11-28 07:36