As a seasoned crypto investor with a few battle scars to show for it, I’ve learned to navigate the rollercoaster ride that is the crypto market with cautious optimism. MicroStrategy’s recent tumble has certainly raised some eyebrows, and as someone who’s been through more than a few market corrections myself, I can’t help but feel a twinge of familiarity.
The significant decline over four consecutive days in MicroStrategy’s market value has raised doubts about its role as a Bitcoin investment tool that uses leverage.
The company’s market value fell by more than 35% from its Nov. 21 peak, erasing over $30 billion.
According to the Kobeissi Letter, the business intelligence firm experienced its biggest four-day decrease on record as noted in their Nov. 26 post.
“MicroStrategy stock, MSTR, just fell a MASSIVE -35% from its peak seen on November 21st. That’s ~$30 BILLION of market cap erased in 4 trading days.”
During this time, as MicroStrategy’s stock price rose, it experienced a temporary dip coinciding with Bitcoin’s (BTC) recent correction. The value of MicroStrategy dropped by approximately 7.5% in the 24-hour period ending at 9:52 am UTC on Nov. 27, trading at $354.1 according to data from TradingView.
MicroStrategy: still a leveraged Bitcoin trade?
The drop occurred at the same time as Bitcoin experienced a correction following its peak at approximately $99,800 on November 22.
Following Bitcoin’s high on November 22nd, the digital currency has experienced a decline of approximately 7%. On the other hand, MicroStrategy’s share prices have dipped by more than 14% since then.
On a larger time scale, both Bitcoin and MicroStrategy have experienced significant growth. In just the past month, Bitcoin has climbed an impressive 44%, and MicroStrategy followed suit with a rally of over 32%. Looking at the yearly graph, Bitcoin has surged by as much as 146%, while MicroStrategy has seen gains exceeding 599%.
Many investors view MicroStrategy as an amplified wager on the value of Bitcoin, anticipating that its price will surpass the earnings generated by other leading cryptocurrencies globally.
Yet, MicroStrategy’s recent 35% decline – over four times greater than Bitcoin’s adjustment – has sparked worries regarding the stock’s volatility given its role as a potential Bitcoin substitute.
MicroStrategy volatility caused by retail investors
The escalating turbulence in the markets is due to an increasing number of retail traders, as suggested by the Kobeissi letter.
“On Wednesday alone last week, retail investors bought ~$42 million worth of MicroStrategy stock, $MSTR. This marked the largest daily retail buy on record and was 8 TIMES higher than the daily average seen in October.”
Retail investors bought nearly $100 million worth of MicroStrategy stock during the past week, with growing interest partly driven by the firm’s $2.6 billion note offering.
Several major established organizations worldwide have invested in Michael Saylor’s company, with Allianz, one of Europe‘s top two insurance providers, purchasing approximately 24.1% of MicroStrategy’s $600 million bond issue back in March.
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2024-11-27 14:08