Strategy (formerly MicroStrategy), the largest corporate holder of Bitcoin, has been one of the loudest champions of the cryptocurrency. But now, its stock (MSTR) is down 40% from its peak, even as Bitcoin struggles to stay above $90,000.
Despite the drop, MSTR is still trading 60% above its fair value—but that gap is closing fast as investors start to realize they may be overpaying. With Bitcoin’s momentum slowing and ETF outflows piling up, is Strategy’s aggressive Bitcoin buying starting to backfire?
Let’s understand.
According to 10x Research, Strategy saw $40 billion in trading volume in November 2024, when Bitcoin briefly surged past $95,000. However, analysts suggest institutional investors took advantage of this rally to sell their positions to retail traders at inflated prices. Now, many of those retail buyers are facing losses, even though Bitcoin has mostly held its ground.
Bitcoin’s price movements suggest the market is entering a consolidation phase. Between September and December 2024, Bitcoin surged 89%, mainly due to expectations of Federal Reserve rate cuts.
However, the December rate cut was seen as “hawkish,” meaning the Fed may not lower interest rates further anytime soon. This has kept Bitcoin stuck in a consolidation phase, increasing the risk of a deeper correction if the Fed remains cautious.
Another key factor dragging Bitcoin down is the sharp increase in ETF outflows. February 2025 is shaping up to be the worst month for Bitcoin ETF withdrawals, with $1.3 billion exiting the market.
Much of the Bitcoin demand from ETFs was driven by hedge funds using short-term arbitrage strategies. As funding rates decline, these trades are unwinding, adding more selling pressure to Bitcoin and the broader crypto market.
Despite Bitcoin’s price struggles, Strategy has continued to buy aggressively, adding $6 billion worth of Bitcoin since December. However, 10x Research points out that Strategy’s stock is losing its premium over its net asset value (NAV).
At its peak, Strategy’s NAV premium was 3.4x, but it has now fallen to 1.6x, implying a fair value of $156 per share.
Notably, Bitcoin is still trading near its November 2024 levels, when Strategy’s stock hit an all-time high of $453. However, MSTR has since dropped to $287, reflecting the shrinking NAV premium.
Bitcoin has broken below its ascending broadening wedge pattern, raising fears of a further drop. According to 10x Research, if Bitcoin doesn’t reclaim this key level, prices could test Strategy’s average purchase price of $66,300.
Technical analysis also shows that Strategy’s stock is breaking below an 11-week support level, adding to bearish sentiment.
With ETF holders and hedge funds continuing to sell and Bitcoin struggling to hold $90,000, the risk of further declines remains high. If Bitcoin continues to slide, Strategy’s stock is likely to follow.
As of now, MicroStrategy holds 499,096 BTC, valued at approximately $44.6 billion, despite market fluctuations.
MSTR is still 60% overvalued, with declining NAV premiums and Bitcoin ETF outflows adding risk, making it a risky investment at current levels.
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