Strategy shares retreated more than 5% on Friday, sliding to $136 as the recent momentum behind the company faded. The stock now sits 20% below its September high and at its lowest level since September 18, with the pullback potentially extending as Bitcoin loses traction and concerns over shareholder dilution intensify.
Bitcoin's weakening momentum pressures Strategy
The drop in MSTR stock coincided with a loss of steam in the Bitcoin rally. After peaking at $87,270 in September, Bitcoin has fallen to around $80,980, with demand in both futures and ETF markets cooling. Spot Bitcoin ETFs have recorded over $534 million in outflows this month, a sharp reversal from the $2.6 billion inflows seen in September and the $3.52 billion added in August. Cumulative inflows for these funds now stand at $56.9 billion, with BlackRock's IBIT holding $66 billion in assets.
Bitcoin futures open interest has also declined, dropping to $52 billion from a high of $62 billion last month. This reduction signals that speculative interest is waning. Additionally, the Coinbase Bitcoin Premium Index has remained negative since September 26, indicating subdued buying pressure from US investors.
Strategy's fortunes are closely tied to Bitcoin's price due to its substantial holdings. The company currently holds 848,250 coins, valued at approximately $68.6 billion at current prices.
Dilution concerns persist
For investors, the prospect of continued dilution remains a key worry. Strategy has been using its stock to fund Bitcoin purchases, and its outstanding shares have surged to 352 million from 93.2 million in 2022. This aggressive share issuance raises questions about the long-term value for existing shareholders.
Technical outlook for Bitcoin and MSTR
Technical indicators suggest that Bitcoin may face further downside. The cryptocurrency has formed a double-top pattern with a neckline at $82,300, a formation that often precedes a bearish breakout. Bitcoin has already slipped below the key support level of $82,233, its highest point on May 10, and has fallen beneath the 50-day moving average. The Relative Strength Index (RSI) continues to trend lower, pointing to additional weakness.
Should Bitcoin decline toward the September support level of $74,933, the value of Strategy's coin holdings would drop to roughly $63.4 billion.
For MSTR, the daily chart shows the stock peaked at $171.40 on September 22 and has since fallen to $134. The shares have dropped below the 25-day moving average and a descending trendline connecting highs from May, September, and October. The MACD indicator has issued a bearish crossover, with both lines pointing downward. This technical setup suggests the stock could continue its slide, potentially targeting the psychological $100 level. A move above $150 would invalidate the bearish outlook and could open the door to $200.
Despite the recent weakness, analysts remain optimistic about MSTR's prospects. Cantor Fitzgerald has set a price target of $208, Citigroup targets $240, Bernstein sees the stock reaching $350, and B.Riley projects $195.
This article is for informational purposes only and does not constitute financial advice.
