Strategy (formerly MicroStrategy), the world’s largest corporate Bitcoin holder, is facing a tough reality. Despite its unwavering commitment to Bitcoin, Strategy’s stock (MSTR) has tumbled 40% from its peak, even as Bitcoin struggles to stay above $90,000.
Retail Traders Face the Heat
According to 10x Research, Strategy saw an astonishing $40 billion in trading volume in November 2024, when Bitcoin briefly soared past $95,000. However, analysts believe institutional investors used this rally to offload positions onto retail traders at inflated prices. Now, many of those retail buyers are holding losses, despite Bitcoin maintaining relative stability.
#MicroStrategy Cracks as #Bitcoin Tests $90K—Is a Deeper Drop Coming?
— 10x Research (@10x_Research) March 8, 2025
👇1-16) During my time in derivatives trading at Goldman Sachs and Morgan Stanley, we observed structural demand for yield products in Asia, where interest rates tend to be relatively low. These products rely… pic.twitter.com/XS1Jk3nk2B
Bitcoin’s rally from September to December 2024 saw an 89% surge, largely fueled by expectations of Federal Reserve rate cuts. But the landscape has shifted.
Hawkish Fed Adds Pressure
The Federal Reserve’s December rate cut was perceived as “hawkish,” signaling that further cuts may not come soon. This uncertainty has led Bitcoin into a consolidation phase, increasing the risk of a deeper pullback if the Fed remains cautious.
Compounding the issue is a surge in ETF outflows. February 2025 is shaping up to be the worst month for Bitcoin ETFs, with $1.3 billion exiting the market. Much of the ETF-driven Bitcoin demand came from hedge funds employing short-term arbitrage strategies. As funding rates decline, these trades are unwinding, exerting additional selling pressure.
MSTR’s Premium Narrows
Despite Bitcoin’s recent struggles, Strategy has continued its aggressive accumulation, adding $6 billion worth of Bitcoin since December. However, its stock’s net asset value (NAV) premium is shrinking. At its peak, MSTR traded at 3.4 times its NAV, but that figure has now fallen to 1.6x, implying a fair value of $156 per share.
With MSTR currently trading at $287, significantly below its November 2024 high of $453, investors are questioning whether its Bitcoin-heavy strategy is sustainable.
Bitcoin has broken below its ascending broadening wedge pattern, raising fears of a further drop. Analysts caution that if Bitcoin fails to reclaim key support, prices could test Strategy’s average purchase price of $66,300.
Also Read: Trump’s Alleged XRP Liquidation: Is a Bitcoin Accumulation Plan Unfolding?
As ETF holders and hedge funds continue to sell, and Bitcoin struggles to maintain $90,000, the risk of further declines remains high. If Bitcoin slides further, MSTR’s stock is likely to follow suit.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of CoinBrief.io. Before making any investment decisions, you should always conduct your own research. Coin Brief is not responsible for any financial losses.
