Written by: Pzai, Foresight News
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?
Price correction from peak
Due to its business model, MicroStrategy's stock price is highly correlated with Bitcoin prices. In December 2024, Bitcoin's price fell approximately 10% from a high of $108,000 to around $97,000. This correction directly affected MicroStrategy's balance sheet value, dragging down its stock performance. MicroStrategy's stock price has historically had a premium relative to its Bitcoin holding value. In November 2024, this premium was as high as 3.5 times, but by early 2025, it had shrunk to 1.6 times. The contraction of the premium indicates that investors' confidence in its 'leveraged Bitcoin investment' narrative is weakening.
MSTR stock price correlation with Bitcoin trends (anchored to Binance BTCUSD pair)
As of December 2024, MicroStrategy holds approximately 446,000 Bitcoins, worth about $43 billion, making it the largest corporate holder of Bitcoin globally. This massive holding has secured its important position in the cryptocurrency market, and it was included in the Nasdaq index that same month, becoming one of the few crypto-related stocks.
However, beyond MSTR, global enterprises remain relatively cautious regarding Bitcoin as an emerging asset. Although the potential returns and asset diversification benefits of Bitcoin have attracted some corporate attention, its high volatility, regulatory uncertainties, and compatibility issues with traditional corporate financial strategies have led most companies to take a wait-and-see approach or conduct limited trials. For example, Microsoft shareholders voted against a Bitcoin investment proposal in December 2024, one of the main reasons being that Bitcoin's high volatility contradicts the demand for stable investments. Markus Thielen, founder of 10x Research, stated in a report to clients: 'As MicroStrategy's stock price has fallen 44% from its peak, and other companies are adopting Bitcoin as a reserve asset strategy on a smaller scale, the Bitcoin bullish sentiment generated by traditional companies seems to be losing momentum.'
Leveraged strategy under pressure
MicroStrategy continues to accumulate Bitcoin by issuing stocks and convertible bonds. This strategy is viewed as a 'flywheel for converting fiat currency into Bitcoin' during Bitcoin bull markets, attracting 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 against inflation. He is also actively lobbying American corporations and governments to embrace Bitcoin.
Due to MicroStrategy's business model being highly dependent on Bitcoin prices, any fluctuations in Bitcoin prices will have a significant impact on its stock price. After Bitcoin reached an all-time high, some investors chose to take profits, putting pressure on MicroStrategy's stock price. On the policy front, related assets also faced some resistance. The Federal Reserve released hawkish signals during its December 2024 meeting, suggesting possible further interest rate hikes to curb inflation. This policy shift has dampened the attractiveness of related assets, and as a leveraged Bitcoin investment tool, MicroStrategy has been particularly affected.
MicroStrategy's leveraged strategy amplifies gains in rising markets but also increases risk in downturns. Market concerns over its debt burden and refinancing capabilities have intensified, especially in the context of falling Bitcoin prices, which could put greater financial pressure on the company. Against the backdrop of a Bitcoin price correction and weakening market sentiment, MicroStrategy's narrative is indeed challenged in the short term. Investor concerns about its high premium and leverage risks have led to a significant decline in stock price.
Outlook
We can see that MicroStrategy's stock price performance will remain highly dependent on Bitcoin prices. Its status as the 'Crypto Federal Reserve' is challenged in the short term due to Bitcoin price corrections and shifts in market sentiment, but its long-term potential still hinges on Bitcoin's price movements and the company's capital operation capabilities. If Bitcoin prices return to an upward trajectory, MicroStrategy's narrative may regain support. Especially with the market expectation that Bitcoin will be widely accepted as a store of value during Trump's term, its strategy of continuously accumulating Bitcoin may still attract investors in the long run.
As investors' valuations of MicroStrategy become more rational, 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 adjustments in stock price but also provides better entry opportunities for long-term investors.
The new accounting rules that will take effect in 2025 will allow MicroStrategy to report the value of its Bitcoin holdings at fair value, which could significantly boost its net income and attract more institutional investors, potentially leading to inclusion in the S&P 500 index (though this possibility is small). Despite the potential continued pressure on MicroStrategy's stock price in the short term, its solid position as the largest corporate holder of Bitcoin still holds 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 be reflected in its price. If the Bitcoin market returns to an upward trend, MicroStrategy may once again become a focal point for investors.
