MicroStrategy (MSTR), a company focused on Bitcoin development, reportedly saw its stock price drop by 16 percent on Thursday, although Bitcoin came close to $98K. This autumn added more fuel to the fire with regards to the company’s overvaluation, with some analysts now saying that its market cap is no longer connected to Bitcoin. In the latest information at the end of this week, Micro-Strategy market capitalization was over three times the amount of BTC on its balance sheet.
MicroStrategy’s Valuation Under the Lens
MicroStrategy’s share price has been on a remarkable performance for the year 2024, and it’s more than 5 times up from the start of the year. Still, Thursday’s shocking 16% decline was a sign that its recent performance was not all that steady. The drop was after three days of double figures rising and record high trading volume, which actually trumped those of leading firms such as Nvidia and Tesla.
Citron Research’s Andrew Left, a former bullish voice, outlined his fears in a note issued on Thursday. “MicroStrategy’s [valuation] has completely detached from Bitcoin fundamentals,” wrote Left, who continues to like Bitcoin but has bet against MicroStrategy.
Micro strategy
Jonathan Weil of The Wall Street Journal expressed the same worries about MicroStrategy’s valuation, saying that it is purely speculative. He said, “They can sell the company’s shares at higher prices to raise more funds to buy more Bitcoin to generate a positive flywheel effect that lifts the stock further”. Weil said, “To take a long position in MicroStrategy’s stock is to bet that increasingly strange inefficient markets will become even more inefficient.”
Bitcoin Nears $100K: A Catalyst for Controversy
Bitcoin price, which surged to about $98,000 on Thursday, is one of MicroStrategy’s essential stock-driving forces. Since the appointment of Michael Saylor as the executive chairman of the company, it has claimed that it is a Bitcoin investment vehicle and has been using the company money to buy huge amounts of Bitcoin.
Though the rally in Bitcoin has been beneficial for MicroStrategy, sceptics are of the opinion that the company’s own stock is overvalued. Technical analyst Bracco who has a large following on X (ex-twitter) said it is a “textbook parabolic short.” Such increases are considered signs of overvaluation by Bracco, for this reason three day rapid gains and high trading volumes by the stock led to bearish outlook on the stock.
However, these signs remain the tips of the iceberg and promote bullish trends in the cryptocurrency market due to the constant growth of Bitcoin. Still, this optimism has not been sufficient to spare MicroStrategy from rising scepticism on the side of analysts and investors.
The Bigger Picture: Bubble or Opportunity?
The observed stock movement of Micro Strategy has contributed to a larger discussion of business strategy and crypto assets. Advocates believe that establishing the company’s bright Bitcoin vision is the right thing to do in parallel with the gradual development of the digital currency.
However, skeptics raise concerns with impacts that are associated with excessive focus on the price risks of Bitcoin. With Bitcoin now hovering closer to $100,000, the risks for MicroStrategy are much higher than they used to be.
Again, the question arises as to whether the market will maintain such purchases by MicroStrategy or whether a reversal in the Bitcoin price is around the corner. For now the 16 % decline in its stock price is a sharp lesson on the reality of this kind of business valuation based on speculative assets.
Conclusion
MicroStrategy’s stock price declined steeply on Thursday, increasing fears of the firm’s valuation prospects while Bitcoin tests its record high. While there are those out there arguing that the company is now ahead of the curve when it comes to Bitcoin, there are others who point out that its stock has been decoupling from tangible value.
As MicroStrategy is striving to overcome these challenges, it’s going to remain dependent on Bitcoin being able to maintain its bull run plus the luck of the market on believing in MicroStrategy’s strategy. Holders have so much to wonder whether today’s dip is just a bearish blip or the beginning of this multi-billion dollar company’s correction from supporting Bitcoin. Keep following TheBITJournal and keep an eye on the latest crypto updates.
Follow us on Twitter and LinkedIn and join our Telegram channel to be instantly informed about breaking news!
