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 retreat
Due to its business model, MicroStrategy's stock price is highly correlated with Bitcoin prices. In December 2024, Bitcoin prices fell about 10% from a high of $108,000 to around $97,000. This pullback directly affected MicroStrategy's balance sheet value, dragging down its stock price performance. Moreover, MicroStrategy's stock price has long been at a premium relative to its Bitcoin holdings. 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.
Correlation of MSTR stock price with Bitcoin trends (anchored to Binance BTCUSD currency pair)
As of December 2024, MicroStrategy holds approximately 446,000 Bitcoins, valued at around $43 billion, making it the largest corporate holder of Bitcoin globally. This substantial holding gives it a significant position in the cryptocurrency market and led to its inclusion in the Nasdaq index that month, becoming one of the few crypto-related assets.
However, outside of MSTR, global enterprises remain relatively cautious about Bitcoin as an emerging asset. Although the potential returns and diversification advantages of Bitcoin have attracted some companies' attention, 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 take limited attempts. 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 company's pursuit of 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, while other companies are adopting Bitcoin as a reserve asset strategy on a smaller scale, the narrative of traditional companies flooding in seems to be losing momentum.'
Leverage strategy under pressure
MicroStrategy finances its ongoing Bitcoin accumulation through the issuance of stocks and convertible bonds. This strategy is viewed as a 'flywheel to convert fiat currency into Bitcoin' during the Bitcoin bull market and has attracted numerous 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 U.S. companies and the government 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 have also faced some resistance. The Federal Reserve released hawkish signals at its December 2024 meeting, suggesting possible further interest rate hikes to curb inflation. This policy shift has dampened the attractiveness of related assets, and MicroStrategy, as a somewhat leveraged Bitcoin investment tool, has been particularly affected.
MicroStrategy's leveraged strategy amplifies gains during uptrends but increases risks during downtrends. Concerns about its debt burden and refinancing ability have intensified, especially in the context of falling Bitcoin prices, which may put greater financial pressure on the company. Against the backdrop of Bitcoin price corrections and weakening market sentiment, MicroStrategy's narrative is indeed challenged in the short term. Investors' concerns about its high premium and leverage risks have intensified, leading to a sharp decline in its stock price.
Outlook
We can see that MicroStrategy's stock price performance will still be highly dependent on Bitcoin prices. Its status as the 'crypto Fed' is challenged in the short term due to the Bitcoin price correction and changes in market sentiment, but its long-term potential still hinges on the price trend of Bitcoin and the company's capital operation capabilities. If Bitcoin prices return to an upward trajectory, MicroStrategy's narrative may regain support. Especially with the expectation that Bitcoin will be widely accepted as a store of value during Trump's tenure, its ongoing strategy of 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 the value of its Bitcoin holdings rather than maintaining a high premium. This rationalization process may lead to further adjustments in the stock price 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 may significantly enhance its net income and attract more institutional investors, possibly even being included in the S&P 500 index (though this possibility is low). Although MicroStrategy's stock price performance may continue to be under pressure in the short term, its solid position as the largest corporate holder of Bitcoin still has 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 the focus of investors.