MicroStrategy Stock Crashes 33%: Is Its Bitcoin Strategy Failing?

MicroStrategy’s Bitcoin strategy is very simple: Raising debt to buy Bitcoin and selling shares at a premium to repeat the cycle. Until recently, it had been regarded as outstanding. At the start of November 21, the MicroStrategy price stood at a peak of $535.42. But just days later, something unexpected happened. The stock has since dropped by over 33%.

What’s behind this sudden fall, especially when Bitcoin itself has only slipped slightly?

Dive in to discover the story behind the numbers and what this means for the company’s future.

Massive Stock Drop for MicroStrategy 

In the past four days, MicroStrategy’s stock has plunged by 33.94%, marking its biggest four-day drop in recent history. This has resulted in the company losing more than $30 billion in market value.

Is the company’s so-called revolutionary Bitcoin strategy about to fail?

Retail Investors Jump In: Did They Drive the Crash?

In the days leading up to this drop, retail investors were significantly active in buying MicroStrategy stock. On one day last week, they bought $42 million worth of MSTR stock, the highest recorded daily purchase. Overall, retail investors purchased over $100 million in MSTR stock last week.

Interestingly, MicroStrategy saw over $136 billion in trading volume last week, a number much higher than Amazon, a company with a market cap 29 times larger. This surge in activity shows how much retail investors are influencing the stock price.

Just a Ponzi Scheme?

At present, MicroStrategy holds at least 386,700 Bitcoin tokens, worth nearly $35,764,258,860. However, the total market cap of the company is over 74.95B. This indicates that the company market cap is at least 2.1x higher than the value of its BTC holdings. 

In the last two months, MicroStrategy’s stock has surged by 113.07%, far outpacing Bitcoin’s 41.19% increase. While this strong performance could indicate that the company’s Bitcoin-focused strategy is working, it also highlights the increased volatility of MicroStrategy’s stock compared to Bitcoin.

This raises concerns about the risks involved in such a strategy.

Peter Schiff’s Warning

Peter Schiff has criticized the rapid pace at which MicroStrategy has been buying Bitcoin. The company has already spent $10 billion out of its planned $42 billion Bitcoin purchase. Schiff warns that once the plan is complete, both MicroStrategy and Bitcoin could experience a sharp decline.

Supporters of MicroStrategy’s strategy believe it’s a game-changer, positioning the company for long-term growth. They see the approach as a smart way to bet on Bitcoin’s future value.

However, critics argue that the strategy is unsustainable and risky, with growing debt and market volatility making it resemble a Ponzi scheme.

FAQs