Michael Saylor’s MSTR stock price has plummeted in the past few months, entering a deep bear market after a decline of over 26% from the year-to-date high. This crash could accelerate as a senior Federal Reserve official delivered a hawkish statement, and after the Bitcoin price forms a highly bearish chart pattern.
Federal Reserve’s Beth Hammack Warns Again on Interest Rate Cuts
MSTR and other Bitcoin treasury companies may be at risk of a steeper crash after the Cleveland Fed’s Beth Hammack warned that the central bank should exercise caution when cutting interest rates.
Unlike other Federal Reserve officials, Hammack believes that the bank should focus on inflation, which remains at elevated levels. It has remained above the Fed’s target of 2.0% in the last four years, and it will take longer to reach the target. She expects rate cuts to trigger higher inflation in the coming months.
She also believes that the labor market remains strong and resilient, despite recent numbers showing that the unemployment rate rose to 4.3% as the economy created just 22,000 jobs. In her statement, she noted that the jobless rate is low and that layoffs were not happening as expected. She added:
“I think that we should be very cautious in removing monetary policy restrictions. It worries me that if we remove that restriction from the economy, things could start overheating again.”
Her view, if implemented, would be bearish for Bitcoin and the broader crypto market as investors are now pricing in several interest rate cuts in the coming months. It would also hit Bitcoin treasury companies like Strategy.
In its decision last week, the Fed opted to cut interest rates by 0.25%, with the dot plot pointing to more cuts in the next few meetings.
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Potential Bitcoin Price Crash and Falling NAV Ratio
Meanwhile, the MSTR stock price also faces the risk of further downside because of Bitcoin’s weak technicals. As the chart below shows, the coin has formed a highly bearish rising wedge chart pattern on the weekly chart.
It has also formed a bearish divergence pattern as the Relative Strength Index and the Percentage Price Oscillator have slipped during the bull market. A Bitcoin price crash would likely impact MSTR, as it is widely regarded as its proxy.
At the same time, Strategy’s NAV multiple has plunged to 1.32, down from the November high of 3.4. Falling NAV multiple is important for a company like Strategy because it has historically used it to raise money, which it then uses to accumulate Bitcoin.
MSTR Stock Death Cross Has Formed
Meanwhile, the daily timeframe chart shows that the MSTR stock has formed the highly bearish death cross pattern, which happens when the 50-day and 200-day Weighted Moving Averages cross each other.
Strategy stock has also formed a bearish flag pattern, which is characterized by a vertical line and a horizontal channel, resembling an upside-down flag pattern.
Therefore, these patterns point to more downside in the coming weeks, with the next key support level to watch being the psychological level at $250, which is about 25% below the current level.
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