2024-04-18 22:07:33
- MSTR extended its weekly losses to around 20%.
- Concerns over Bitcoin halving and “overvaluation” could give sellers more leverage
MicroStrategy ( MSTR ) stock extended its weekly losses to more than 19% just hours before Bitcoins [BTC] fourth halving. After hitting an all-time high of $1,999.99 on March 27, the stock pulled back and reversed some of its monthly gains. MSTR’s weekly loss marked an extended three-week retreat on the charts.
On a quarterly basis, the share was down 30% in the second quarter. On the contrary, year-to-date performance had a reading of +73.4%, at the time of writing.
On April 17, MSTR closed at $1,188.05, a huge discount for anyone who hasn’t jumped into the stock before. Still, macroeconomic conditions and price charts revealed that juicier discounts may still be possible for anyone who decides to dive in.
Will MSTR Extend Losses Amidst Bitcoin Halving?
As one of the companies with a Bitcoin strategy, MSTR stock correlates strongly with BTC. This is demonstrated by its positive correlation coefficient since mid-February.
What this means is that the prolonged BTC price decline has also dragged down MSTR stock.
Between March 27 and April 18, BTC fell 13%, from $71.7K to $62.4K on Bitstamp. In the same period, MSTR fell 40%, more than 3 times the fall of BTC.
Right now, the bears have more leverage after the MSTR dropped below the 10-day and 20-day SMA (simple moving averages), marked in blue and orange, respectively.
If the bears push further, the next target is the 100-day SMA ($896), which would mark an attempt to push the value of MSTR below $1,000. If this happens, there may be a better discount for bulls that missed out on the previous promotion.
The below-average reading on the Relative Strength Index (RSI) is a sign of increased selling pressure, supporting the extended downside forecast.
Bitcoin Halving and MSTR “Overrated”
Additionally, the Bitcoin halving could encourage MSTR bears if BTC selling pressure increases during the event.
MicroStrategy’s current BTC holdings total 214,246 coins, worth over $13 billion based on current market prices. Most of them have been acquired through convertible debentures issued by the company.
However, the current dumping is also resonating with some market watchers who feel MSTR stock is overvalued. Last month, private investment manager Kerrisdale Capital fixed the same,
“We are long in Bitcoin and short stocks in MicroStrategy, a Bitcoin proxy that trades at a price “unjustifiable premium to the digital asset that drives its value.”
Kerrisdale Capital argued that the new BTC spot ETFs offer alternatives to gaining exposure to BTC, denying MicroStrategy any unique advantages for the premiums it charges.
For perspective, some investors had previously preferred to buy MSTR to gain indirect exposure to BTC.
Simply put, the private investment manager believes that the fair value of MSTR is between $700 and $800. The upper estimate is closer to the bearish target marked by the 100-day SMA (yellow).
However, the projection could be invalidated, especially in the unlikely event of a massive Bitcoin rally around the halving.
This is an automatic translation of our English version.
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