- MSTR extended its weekly losses to about 20%.
- Fears of Bitcoin Halving and ‘Revaluation’ Could Offer Sellers More Leverage
MicroStrategy (MSTR) shares extended their weekly losses to more than 19% just hours earlier. Bitcoins (BTC) fourth halving. After hitting an all-time high of $1,999.99 on March 27, shares fell, reversing some of their month-long gains. MSTR’s weekly losses marked an extended three-week pullback on the charts.
On a quarterly basis, the stock fell 30% in the second quarter. In contrast, as of this writing, its performance this year is +73.4%.
On April 17, MSTR closed at $1,188.05, which is a huge discount for anyone who didn’t buy the stock before. However, macroeconomic conditions and price charts have shown that better discounts may still be possible for anyone who decides to get into it.
Will MSTR Extend Losses Amid Bitcoin Halving?
Source: MSTR stock, daily chart.
The stock of MSTR, one of the corporations with a Bitcoin strategy, is highly correlated with BTC. This is evidenced by its positive correlation coefficient since mid-February.
This means that the continued decline in BTC prices is also dragging down MSTR stock.
From March 27 to April 18, BTC fell 13%, from $71.7 thousand to $62.4 thousand on Bitstamp. Over the same period, MSTR fell 40%, more than 3 times the decline of BTC.
Bears now have more leverage after MSTR fell below the 10-day and 20-day SMA (simple moving average), marked in blue and orange, respectively.
If the bears move further, the next target will be the 100-day SMA ($896), which would indicate an attempt to push the MSTR value below $1,000. If this happens, it could be a better discount for the bulls who missed the previous action.
A below-average RSI (relative strength index) reading is a sign of increasing selling pressure and supports an extended downside outlook.
Bitcoin Halving and MSTR ‘Overvalued’
Additionally, the Bitcoin halving could embolden MSTR bears if BTC selling pressure increases during the event.
MicroStrategy’s current BTC holdings are 214,246 coins, worth over $13 billion, based on current market prices. Most of them were acquired through convertible notes issued by the company.
However, the current dumping also resonates with some market observers who believe MSTR stock is overvalued. Last month, private equity manager Kerrisdale Capital fixed same,
“We are long Bitcoin and short MicroStrategy, a Bitcoin proxy that trades at “an unjustified premium on a digital asset that increases its value.”
Kerrisdale Capital argues that the new BTC spot ETFs offer an alternative to gaining exposure to BTC, depriving MicroStrategy of any unique advantage in the premiums it charges.
Looking ahead, some investors previously chose to buy MSTR to gain indirect exposure to BTC.
Simply put, the private equity manager believes MSTR’s fair value is between $700 and $800. The upper estimate is closer to the bearish target marked by the 100-day SMA (yellow).
However, this prediction may be invalidated, especially in the unlikely event of a massive Bitcoin rally around the halving.
This is an automatic translation of our English version.