Traders are stepping back from MicroStrategy (MSTR), the Nasdaq-listed company known for its leveraged exposure to Bitcoin (BTC). The shift in market sentiment marks a stark contrast to the once highly bullish outlook surrounding the stock.
Almost a month ago, calls were commanding a premium. According to Market Chameleon, the company’s 250-day put-call skew, which measures the difference in implied volatility between calls and puts, has now moved from a significant -20% to zero within just three weeks, and the current outlook is now “slightly bearish.”
This indicates that call options, which traders typically use to benefit from upward price movements, are now trading at similar levels to put options that provide downside protection, highlighting the weakening bullish sentiment surrounding the stock.
The sharp decline in MSTR stock price affects Bitcoin’s bullish skew
MicroStrategy’s stock ended 2024 trading red, following a peak of $589 per share on November 21. The stock lost more than 44% of its value, now trading at $289. Over the past two weeks, the stock’s valuation has dropped by 34%, according to TradingView data.
This sharp decline has caused some analysts to question the viability of MicroStrategy’s approach, especially as other companies adopt Bitcoin as a treasury asset on a much smaller scale.
Markus Thielen, founder of 10x Research, commented on the situation, suggesting that the momentum generated by Bitcoin’s influence on MSTR’s stock appears to be dissipating. “With MicroStrategy shares now down 44% from their peak, the Bitcoin tailwind generated by this narrative seems to be losing steam,” Thielen noted.
MicroStrategy’s Bitcoin holdings
As of December 31, 2024, per Bitbo data, MicroStrategy continues to hold a significant amount of Bitcoin, totaling 446,400 BTC. The company’s average purchase price stands at $58,219 per Bitcoin, with an overall investment of approximately $23.41 billion.
Despite its stock’s struggles, MicroStrategy has continued to add to its Bitcoin holdings, purchasing an additional 2,138 BTC at an average price of $97,837 per coin at the tail-end of 2024. The acquisition marks the continuation of an eight-week streak of Bitcoin purchases, signaling the company’s ongoing commitment to the cryptocurrency.
Some analysts, including well-known crypto enthusiast @matt_utxo, remain optimistic about MicroStrategy’s prospects. Matt, in a December 31 tweet, predicted that the stock is nearing a bottom, forecasting a potential stabilization between $270 and $300 per share.
Here's some $MSTR cope to finish out 2024… we have a very big 2025 ahead of us.
TL;DR I think that $MSTR is in the process of bottoming and will find its footing in the $270-$300 range (this would satisfy the gap from November 11, it could potentially wick to $250 or lower,… pic.twitter.com/3N7UTLh20D
— Matt (@matt_utxo) December 31, 2024
He suggested that the stock could briefly dip as low as $250, but he sees strength within the $270 to $300 range, which could present buying opportunities for investors in the coming weeks.
Matt attributed the recent sharp decline in MSTR stock to what he called the “popping bubble,” explaining that the stock had previously decoupled from Bitcoin during its rally but has now experienced a reversal.
The crypto analyst went on to describe the stock’s price downtick as a “reverse gamma squeeze,” where the unwinding of positions by traders and the selling of shares by broker-dealers amplified the downward pressure. He believes that the decline may soon come to an end, with signs of strength emerging for MSTR.
Bitcoin’s role in MSTR’s performance
Meanwhile, in late December, MicroStrategy’s chairman and controlling shareholder Michael Saylor revealed that the company filed a preliminary proxy with the Securities and Exchange Commission (SEC), seeking approval from shareholders to increase the number of authorized class A common shares.
The increase in authorized shares would provide capital to purchase more Bitcoins and could capture a significant supply of the cryptocurrency, based on Bitcoin’s current price of around $95,500 per coin, a plan Saylor wants to see through.
A stronger connection between Bitcoin’s price movements and MicroStrategy’s stock could lead to renewed investor interest and potential recovery for MSTR after its sharp decline. That said, the market sentiment has notably shifted to a more cautious stance, with traders reevaluating their positions in the wake of the equity’s recent struggles.
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