Prominent economist and Bitcoin critic Peter Schiff recently warned of a possible sharp drop in the price of Bitcoin, which would result in the loss of corporate investors, primarily MicroStrategy. His comments came as the price of Bitcoin plummeted by nearly 7% in a single day. Additionally, MicroStrategy, the largest Bitcoin holder, saw its MSTR stock price fall by nearly 10%.
Peter Schiff warns of possible collapse
In a recent Twitter post, Schiff pointed out that when it becomes clear that the US government will not buy Bitcoin, many investors who bought in anticipation of such a move may decide to sell. He suggested that this could cause a wave of selling pressure, potentially causing the price of Bitcoin to drop.
A key figure in this scenario is Michael Saylor, CEO of MicroStrategy, one of the company's most vocal Bitcoin advocates. Saylor used leverage to build a large Bitcoin position, betting that the cryptocurrency's price would continue to rise.
According to Schiff, Saylor may have been forced to accelerate his Bitcoin purchases in a desperate attempt to prevent a market crash, which would only delay the inevitable collapse of his leveraged position.
Saylor's Counterproductive Strategy
Schiff's warning focused on the idea that Saylor's strategy of buying Bitcoin with borrowed money could eventually backfire, leading to a collapse in the price of Bitcoin and the value of MicroStrategy's stock.
Saylor recently announced plans to raise $2 billion by issuing perpetual preferred stock in the first quarter of 2025. The move is part of a strategy to buy more Bitcoin and strengthen the company's financial position.
This scenario could get worse if Bitcoin prices drop sharply, leaving Saylor unable to protect his position and forced to liquidate the asset at a loss.
Bitcoin and MSTR prices plummet
As of press time, the price of Bitcoin has dropped below $95,000, reflecting a drop of nearly 7% in the past 24 hours, bringing the market capitalization down to $1.88 trillion. The Relative Strength Index (RSI) is currently at 46.88, indicating that sellers are in control of Bitcoin's price action on the daily chart.
Meanwhile, shares of MicroStrategy (MSTR) closed at $341, down nearly 10% from the previous session. The stock also fell slightly by about 2.46% in premarket trading today.
