The MSTR stock price has remained under pressure over the past few months, crashing below the psychological $200 level for the first time since October. It is down by over 60% from its all-time high. So, is it safe to buy the oversold Strategy stock dip?
Why the MSTR Stock Price Has Crashed
The Strategy stock has been in a strong downtrend in the past few months. This decline is in line with that of other top crypto exchanges and Bitcoin treasury companies, such as Gemini, Bullish, Metaplanet, Semler Scientific, and KindlyMD.
One reason for this crash is that the treasury industry has become highly saturated. There are now over 170 companies with Bitcoin in their portfolios. As such, the company has largely lost the exclusivity it had a few months ago when it was the only game in town.
The other reason is that the company has undergone a valuation reset over the past few months. In the past, the company traded at a significant premium to its Bitcoin holdings. Indeed, some analysts recommended buying MSTR stock rather than spot Bitcoin ETFs due to its premium.
READ MORE: Here’s why Gemini, Bullish, Circle Stocks Have Crashed After IPOs
As such, the MSTR stock crash is likely due to investors resetting its valuation. The company’s market NAV has now fallen below 1, as its Bitcoin pile is valued at $60.6 billion, compared with its market value of $57 billion. Also, the enterprise NAV has dropped to 1.194 and could move to below 1, as Metaplanet has done.
The falling Strategy mNAV multiple is risky because it will make it difficult to raise money. Based on its business model, the company relies on Bitcoin accumulation to boost its stock value.
The MSTR share has also plunged because of the ongoing Bitcoin price crash. BTC moved from a record high of $126,300 in October to its current level of $94,000.
Strategy Stock Price Technical Analysis
The daily timeframe chart shows that MicroStrategy’s stock price has been in a strong downtrend. It has now moved below the important support at $230, the lower side of the inverse cup-and-handle pattern.
MSTR share price has formed a death cross pattern as the 50-day moving average has moved below the 200-day MA. Additionally, the stock’s Relative Strength Index (RSI) and the Stochastic Oscillator have moved to the oversold.
The Average Directional Index (ADX) has moved to 40, a sign of increasing momentum. Therefore, the stock will likely continue falling in the near term. Based on its inverse C&H, there is a risk that it will drop to the key support at $100.
On the positive side, the MSTR share price is likely to bounce back as the Bitcoin price rebounds.
READ MORE: Will Crypto Recover as Fear and Greed Index Nears Buy Zone?
