MicroStrategy Falls 16% Despite New Bitcoin Record as Some Question Valuation

During trading, MicroStrategy experienced a drop exceeding 20% and ended the day down 16.2%. However, this decrease is just a minor fluctuation when viewed on the larger, long-term graph. Shares are currently more than five times their value predicted for 2024, and they’ve nearly quadrupled from where they were one year ago.

In a statement made earlier today, Andrew Left from Citron Research expressed that MicroStrategy’s valuation no longer aligns with the foundations of Bitcoin. Previously a supporter of the stock who advised investing in Bitcoin through buying MicroStrategy four years ago, Left now maintains a bullish stance on Bitcoin but has taken a bearish approach towards MSTR by selling it short.

Yesterday and earlier on Thursday, MicroStrategy’s market capitalization surpassed $100 million, which is over three times the worth of the approximately 331,000 bitcoins it holds on its balance sheet ($32.5 million at a price of around $98,000 per coin). However, due to today’s price drop, MicroStrategy’s market capitalization has now decreased to approximately $80 million.

On X, Bracco, a widely followed technician, stated before Thursday’s market opening that MicroStrategy (MSTR) had fulfilled his criteria for what he described as a textbook parabolic short. This assessment was based on three successive days of double-digit percentage increases, a significant overnight price hike, and other factors such as MSTR’s dollar volume on Wednesday surpassing that of heavyweight tech stocks like Nvidia and Tesla. Additionally, he pointed out that a leveraged exchange-traded fund (ETF) focused on MSTR was the fifth most actively traded fund in the entire market.

In simple terms, Jonathan Weil in the Heard on the Street column of The Wall Street Journal pointed out an ongoing cycle that has significantly increased the company’s stock value. This high-valued stock enables the company to secure funds at advantageous rates and purchase Bitcoin. As the price of Bitcoin grows, so does the stock. In response, Michael Saylor and his team buy even more Bitcoin, perpetuating this cycle.

In simpler terms, Weil suggested that if one believes Bitcoin’s price will rise further, they should invest in it. Investing in MicroStrategy’s stock, he added, is essentially betting that the already inefficient markets will grow even more inefficient.