Yesterday, there were some interesting news regarding MicroStrategy and Bitcoin, and curiously they were good news for BTC but bad for the company
The thing surprised many, because by now what is positive for Bitcoin tends to be so for MicroStrategy as well.
Crypto news: the purchases of Bitcoin by MicroStrategy
The news is that the company has raised another three billion dollars to purchase more Bitcoin
MicroStrategy already owns more than 330,000 BTC, purchased by investing about 16 and a half billion dollars over the last four years
The current market value of the Bitcoin owned by MicroStrategy is close to 33 billion dollars, so their investment is currently in strong bull
Such gain, however, is only potential, because it would only be realized with the sale of BTC and the collection of dollars, yet MicroStrategy not only does not intend to sell, but actually intends to purchase more
The current price of Bitcoin is at an all-time high, and buying any asset at an all-time high rarely turns out to be a deal
The decline in the Stock Market of MSTR shares
In fact, the markets do not like this latest move by MicroStrategy
The company has been listed on the stock exchange since 1998, and the price of its shares at this moment is at an all-time high
Yesterday, however, it dropped by almost 20% from the approximately $500 it had the day before
It is possible that yesterday’s strong correction in the price of MSTR shares is precisely due to the fact that the markets did not like the initiative to issue debt for three billion dollars to purchase more BTC at the highs
MicroStrategy is a heavily indebted company, precisely because it continues to borrow dollars to purchase Bitcoin
It is equally true, however, that the market value of the BTC it holds far exceeds the total value of its billion-dollar debts, but the value of Bitcoin is volatile, and therefore sooner or later it could also go down
The problem is that the more debt is issued, the greater the risk of not being able to repay it, especially if it is used to purchase financial assets at their peak
The performance on the Stock Exchange
Having said that, yesterday’s could have been just a temporary correction, and not a true retracement
At the beginning of the year, the price of MicroStrategy shares was even below $50
Note that the previous all-time high was recorded even in 2000, during the height of the dot-com bubble, just above $330. The high reached in 2021 was $130, also because at that time the company owned only relatively few BTC
However, starting from February of this year, the stock began to soar
In March it had approached $200, widely beating the 2021 record, and in October it had reached $220
With the victory of Trump in the US presidential elections, the stock began to rise dramatically.
Initially, it had approached $280, but by November 11, it had already returned above $300. The new all-time high was reached on that very day, with momentum, and by November 13, it had also risen above $380.
A new rise began on Monday, with surpassing $400 the following day
At that point, a mini-speculative bubble inflated that simply burst yesterday on the wave of the news of the issuance of new debt
The future of MicroStrategy after the latest news on Bitcoin
What happened yesterday on the stock market to the MSTR stock seems just like the burst of a mini-bubble
On the other hand, the price of its shares has increased by 75% in two weeks after Trump’s victory, and this in traditional financial markets is a truly remarkable performance
In fact, from the closing price on November 5 to the maximum peak recorded yesterday at the opening, before the burst of the mini-bubble, the gain was 138%, which is well beyond the norm in the bull
In some ways, yesterday’s correction can even be interpreted as a healthy correction after an excess of enthusiasm, also because the price then seems to have settled at those $400 reached for the first time in history by MSTR on Tuesday, which were already a remarkably optimistic milestone until just a few weeks ago
It’s hard to say how the stock will behave in the coming days, but in the medium/long term, it will most likely continue to follow the trend of Bitcoin
The risk
There are, however, also those who in this correction see a sign of possible fundamental risks
According to some analysts, in fact, the stock market valuation of MicroStrategy would have completely detached from the fundamentals of Bitcoin
That is, although until now in recent years the trend of MSTR stocks on the stock market has followed that of BTC, there are those who are beginning to suspect that this correlation may be running out
Obviously, not everyone agrees with this hypothesis, so much so that probably the majority of analysts do not think so, but there is a fact that reveals that this is an absolutely plausible hypothesis
The current market capitalization of MicroStrategy is about 80 billion dollars. The value of the company is primarily given by the BTC it holds in cash, but these are worth “only” 33 billion
To tell the truth, however, until November 5th there wasn’t such a gap, because it was generated mainly due to the mini-bubble produced by the so-called Trump trade
The risk, therefore, is that the burst of the mini-bubble may continue in the coming days, and perhaps bring the price of MicroStrategy shares well below $400
