As a company with Bitcoin reserves as its core strategy, MicroStrategy (MSTR) has been favored by U.S. stock investors in recent years due to its firm support for Bitcoin and the Bitcoin-crazy market environment.
However, since hitting an all-time high of $589 on November 21, MSTR's stock price has fallen by more than 44% to $300, and its market value has fallen by 34% in the past two weeks alone. As a crypto asset that stands out in the U.S. stock market, subtle changes in the market environment have also turned into drastic fluctuations in stock prices. In the end, can the narrative of the "Crypto Federal Reserve" continue to maintain its former glory?
High point pullback
Due to its business model, MicroStrategy's stock price is highly correlated with Bitcoin prices. In December 2024, Bitcoin's price fell about 10% from a high of $108,000 to around $97,000. This pullback directly affected the value of MicroStrategy's balance sheet, dragging down its stock performance. Moreover, MicroStrategy's stock has historically traded at a premium relative to its Bitcoin holdings. In November 2024, this premium reached as high as 3.5 times, but by early 2025 it had shrunk to 1.6 times. The contraction of this premium indicates that investor confidence in its 'leveraged Bitcoin investment' narrative is waning.
As of December 2024, MicroStrategy holds approximately 446,000 Bitcoins, valued at about $43 billion, making it the largest corporate holder of Bitcoin in the world. This massive holding gives it a significant position in the cryptocurrency market, and it was included in the Nasdaq index in the same month, becoming one of the few crypto assets listed there.
However, outside of MSTR, global enterprises remain relatively cautious about Bitcoin as an emerging asset. Although the potential returns and diversification benefits of Bitcoin have attracted some corporate interest, its high volatility, regulatory uncertainty, and compatibility issues with traditional corporate financial strategies have led most companies to adopt a wait-and-see approach or to try it out in a limited way. For example, Microsoft shareholders voted down a Bitcoin investment proposal in December 2024, one of the main reasons being the contradiction between Bitcoin's high volatility and the demand for stable investments from corporations. Markus Thielen, founder of 10x Research, stated in a report to clients: 'With MicroStrategy's stock down 44% from its peak, while other companies are adopting Bitcoin as a reserve asset strategy on a smaller scale, the narrative of traditional firms rushing in seems to be losing momentum.'
Leverage strategy under pressure
MicroStrategy has been financing its continued Bitcoin purchases by issuing stock and convertible bonds. This strategy was seen as a 'flywheel converting fiat currency into Bitcoin' during the Bitcoin bull market and attracted a large number of investors. The company's founder and CEO, Michael Saylor, has repeatedly stated that Bitcoin is 'digital gold' and the best tool for hedging against inflation. He is also actively lobbying for American businesses and governments to embrace Bitcoin.
Due to MicroStrategy's business model being highly dependent on Bitcoin prices, any fluctuations in Bitcoin's price will significantly impact its stock price. After Bitcoin reached an all-time high, some investors opted to take profits, putting pressure on MicroStrategy's stock price. On the policy front, related assets are facing some resistance. The Federal Reserve released hawkish signals at its December 2024 meeting, hinting at possible further rate hikes to curb inflation. This policy shift diminished the attractiveness of related assets, and MicroStrategy, as a leveraged Bitcoin investment tool, was particularly affected.
MicroStrategy's leveraged strategy amplified gains during rises but also increased risks during declines. Concerns about its debt burden and refinancing capabilities have intensified, especially in the context of falling Bitcoin prices, which could place the company under greater financial pressure. In the backdrop of Bitcoin price pullbacks and weakening market sentiment, MicroStrategy's narrative is indeed challenged in the short term. Investors' worries about its high premium and leverage risks have escalated, leading to a significant drop in its stock price.
Outlook
We can see that MicroStrategy's stock performance will continue to be highly dependent on Bitcoin prices. Its position as the 'crypto Federal Reserve' faces challenges in the short term due to Bitcoin price pullbacks and shifting market sentiment, but its long-term potential still hinges on Bitcoin's price trajectory and the company's capital operation capabilities. If Bitcoin prices return to an upward trend, MicroStrategy's narrative may regain support. Particularly with Bitcoin expected to be widely accepted as a store of value during Trump's term, its ongoing strategy of accumulating Bitcoin could still attract investors in the long run.
As investors become more rational about MicroStrategy's valuation, its stock price's deleveraging may bring it closer to its Bitcoin holding value rather than maintaining a high premium. This rationalization process may lead to further stock price adjustments but also provides better entry opportunities for long-term investors.
The new accounting rules effective in 2025 will allow MicroStrategy to report the fair value of its Bitcoin holdings, which could significantly enhance its net income and attract more institutional investors, potentially even leading to inclusion in the S&P 500 index (though this possibility is relatively low). Although MicroStrategy's stock performance may continue to face pressure in the short term, its solid position as the largest corporate holder of Bitcoin still holds certain strategic significance in the market.
As of the time of writing, MSTR's stock price is $300.01. As the Bitcoin market gradually warms up, market sentiment is also expected to reflect in its price. If the Bitcoin market returns to an upward trend, MicroStrategy may once again become a focus for investors.

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