Jessy, Golden Finance

Micro-strategy stocks have been falling since hitting a new high of $543 on November 21, 2024, and are now far away from the highest point It has fallen by 44% and the price is $300. In comparison, the current price of Bitcoin has only fallen by about 10% from its highest point of $107,000.

Micro strategy stock price changes

Before the decline, micro strategy because of its There has been a strong push to buy Bitcoin, with its stock rising nearly 30-fold from its peak of $20 in 2020.

The stock price of MicroStrategy rises as the price of Bitcoin rises, which is called shadow Bitcoin, and the rise in its stock price far exceeds the rise in Bitcoin, and can also be called shadow Bitcoin. Leveraged Bitcoin.

Now, this leveraged Bitcoin also fell earlier than Bitcoin reached its stage peak, and the decline was far greater than Bitcoin's correction.

Why did MicroStrategy’s stocks fall? Is there a risk of further declines?

Why did it go up?

To answer why MicroStrategy’s stock price plummeted, the first thing to understand is why it rose sharply before and what is the value support behind the stock price.

In 2020, MicroStrategy began to purchase Bitcoin. It was also the first U.S. listed company to integrate Bitcoin as a reserve asset. The first buy announced by MicroStrategy was around 21,000 BTC, worth over $250 million, at a time when the price of Bitcoin was below $10,000.

Initially, it used cash to purchase, and then switched to using the issuance and sale of stocks and convertible bonds to raise funds.

Currently, MicroStrategy holds a total of 446,400 Bitcoins, with a current market value of approximately US$45 billion, and a total purchase cost of US$27.9 billion.

MicroStrategy was originally an intelligent software company. After buying Bitcoin, its company's image in the outside world became a "shadow company" of Bitcoin. From October 2000 to September 2020, MicroStrategy's stock price remained below $20 per share. As it continued to purchase Bitcoin, the rise and fall of its stock price began to be separated from its own business, and instead became a Bitcoin concept stock.

Also benefiting from the strategy of actively buying Bitcoin over the years, MicroStrategy’s stock price has soared nearly 30 times from US$20 in 2020 to a high of US$543.

In the rising market, the stock price of MicroStrategy has become an amplifier of the price of Bitcoin, and its increase in recent years has far exceeded that of Bitcoin.

The rise in its stock price is mainly due to the following aspects:

1.Holding a large amount of Bitcoin, as the price of Bitcoin rises, the value of the company's assets rises, which in turn drives the stock price to rise.

2. The market has relatively optimistic expectations for the continued rise of Bitcoin. The popularity of the cryptocurrency market and the optimism of investors will increase investors’ demand for micro-strategy stocks, thereby driving up the stock price. .

3. The company raises funds to purchase Bitcoin through the issuance of stocks and convertible bonds, forming a cycle of "financing - purchasing coins - pushing up market value - refinancing". This unique business model attracts investors, causing stock prices to rise.

Through the above reason analysis, we can know that the stock price of MicroStrategy itself is highly dependent on Bitcoin. It can be said that the fundamentals of its stock price are supported by the value of the Bitcoin it purchased. Its stock price The price increase relies on investors' confidence and expectations for the continued rise in Bitcoin prices.

Why did it fall?

As the stock price of MicroStrategy continues to rise, Big Short Citron Research stated on the social platform Much more than the actual value of its Bitcoin holdings.

As Citron said, MicroStrategy currently holds a total of 446,400 Bitcoins, with a current market value of approximately US$45 billion, and the Bitcoins it holds currently account for more than 2% of the total global Bitcoins. At the peak of MicroStrategy's stock price, its market value exceeded US$100 billion. At this time, its market value was more than twice the market value of the Bitcoin it held. MicroStrategy’s own business is intelligent software, and the profitability of this business is not optimistic. According to MicroStrategy’s financial report, in the third quarter of 2024, its net loss increased and its revenue was lower than expected.

MicroStrategy’s stock price began to decline after reaching a stage top of $543 on November 21. The reasons are roughly as follows:

1. MicroStrategy’s Bitcoin investment strategy was questioned

Currently, MicroStrategy adopts the method of issuing convertible bonds to purchase Bitcoin. According to statistics, MicroStrategy has issued approximately US$13 billion in stocks and US$3 billion in convertible bonds, and has used these funds to All used to buy Bitcoin. Since October 31, MicroStrategy has been buying Bitcoin for eight consecutive weeks, accumulating a total of 19,418 Bitcoins.

His last two Bitcoin investments were bought at an average price of 97,000 yuan. However, after the recent purchases, Bitcoin has fallen. Although MicroStrategy continues to issue bonds to purchase Bitcoin, the current buying price is already high, which makes investors worry about the company's investment decisions and financial status, which in turn affects the stock price.

Moreover, MicroStrategy has almost completely shifted its business model to Bitcoin. It is too dependent on Bitcoin's price fluctuations and market performance, and the company's single business brings high risks. When the Bitcoin marketWhen current volatility or investor interest in Bitcoin weakens, the stock price of MicroStrategy will be greatly affected.

2. Micro-strategy leveraged ETFs intensify the volatility of micro-strategy stock prices

Micro-strategy is Bitcoin with added leverage, and related ETFs are leveraged micro-strategy stock prices. In other words, the micro strategy itself is a leveraged bet on Bitcoin, and some current micro strategy leveraged ETFs are designed for investors who want to make more aggressive bets on stock micro strategy tickets.

Leveraged funds such as Tuttle Capital Capital and Defiance ETFs focus on micro-strategy stocks to amplify their returns related to Bitcoin. These funds carry out leverage operations through swaps and options, but face liquidity problems, causing performance to be worse than expected. Investors were disappointed with the fund's skewed performance, and some analysts believed that the launch of the leveraged micro-strategy ETF accelerated the stock's volatility. These ETFs must increase or decrease their exposure each day to achieve the effect of leverage. Market makers offering swaps and options will often buy and sell actual micro-strategy stocks to hedge their risk.

3. Changes in market expectations

Currently, the micro strategy has been included in the Nasdaq 100 Index (The Nasdaq 100 Index is an index covering the stocks of the largest non-financial companies in the United States. Reflecting the overall performance of multiple industries such as technology, consumer goods, and biopharmaceuticals), this means that it has become one of the 100 largest companies on Nasdaq by market value. Companies included in the Nasdaq 100 Index are usually subject to stricter financial supervision and market scrutiny, which also places higher requirements on how micro-strategies manage their Bitcoin assets. Entering the Nasdaq 100 is a good implementation of the stock price of a micro strategy.

The high-priced purchase of Bitcoin by micro-strategy and the sharp rise in the stock price of micro-strategy in the short term have made the market worried about the existence of a bubble. When market concerns about bubbles intensify, investors often choose to sell stocks to avoid risks, triggering sharp falls in stock prices.

4. Macroeconomic factors

Like Bitcoin’s recent correction, MicroStrategy’s stock price will not be affected by macroeconomic factors. Currently, U.S. bond yields remain high and the U.S. dollar index continues to rise. People even judge that the United States may restart interest rate hikes if inflation rebounds in 2025. At present, the uncertainty of the global economic situation, rising interest rates, inflation and other macroeconomic factors may cause investors to reduce their risk appetite and reduce investment in high-risk assets such as micro-strategy stocks.

5. The number of micro-strategy imitators has increased, and coupled with the launch of Bitcoin spot ETFs, the rarity of its stocks has been greatly reduced

Seeing the micro-strategy of issuing bonds to buy Bitcoin, thus The act of inflating one's own stock price is so profitable that many listed companies have followed suit, such as the mining company Marathon Digital, the Japanese investment company Metaplanet, and so on.

A large number of companies are pouring into this competitionDow, the scarcity of micro-strategy stocks is greatly reduced. In the traditional financial market, if people want to invest in "leveraged Bitcoin", there are other company stocks to choose from, and they can also choose Bitcoin spot ETFs.

Can micro strategy stocks still be bought?

Let me tell you the conclusion directly - not recommended.

Currently, the biggest uncertainty in the investment market is macroeconomic factors. After Trump returns to the White House, there is great uncertainty in his announcement of comprehensive tariff increases. If tariffs of up to 60% and the other 25% are implemented, it may trigger an escalation of global trade frictions, which will not only reshape the global trade pattern, but may also impact U.S. inflation, GDP, currency value and various investment channels, thereby affecting the U.S. stock market. cause significant impact.

There is extremely high uncertainty about the current interest rates of the Federal Reserve. The market originally expected the Federal Reserve to continue to cut interest rates in 2025, but Federal Reserve Chairman Powell's statement in December 2024 was more cautious. If the Federal Reserve's interest rate decision is inconsistent with market expectations, such as an interest rate cut that is less than expected or a sudden interest rate increase, this will trigger the US stock market substantial adjustments.

Currently, as a leveraged Bitcoin, MicroStrategy’s stock price is already on the high side. Although it has fallen 44% from its highest point, it is still 30% lower than the stock price when the company first bought Bitcoin. The stock price still maintains a more than ten-fold increase. This is much higher than Bitcoin’s gains. On the other hand, the current market value of the company is also much higher than the market value of its Bitcoin reserves. All these indicate that there is a large bubble in the company's stock.

The price of Bitcoin will continue to rise in the future, and MicroStrategy’s continued debt issuance and currency buying behavior may also push up its stock price again. However, it is foreseeable that as a stock that has been discovered in value, support Its stock price is only the price of Bitcoin and the leverage its stock adds to Bitcoin. Bitcoin will not be replaced, but the narrative of micro-strategy will be outdated and replaced.

To sum up, the current risks of Shangche micro-strategy stocks are greater than their returns.