The MSTR stock price continued its strong downward spiral on Tuesday as Bitcoin and most altcoins plunged. It dropped to $122, down substantially from the all-time high of $542. This article explores some of the top reasons why Strategy may continue falling, potentially to $100 and below in the near term.
MSTR Stock Crash to Continue as Bitcoin Lacks a Clear Catalyst
The first main reason why the MSTR stock price may continue falling is that Bitcoin lacks a clear catalyst in the near term. For one, geopolitical risks continue rising, with most analysts expecting that Donald Trump will attack Iran in the coming days or weeks.
The urgency of an attack has jumped after a WSJ report showed that conditions in USS Gerald Ford were getting worse, with sailors lining up for over 40 minutes to use bathrooms.
An Iranian attack would lead to a Bitcoin price crash because the coin is no longer seen as a safe-haven asset. Bitcoin price has constantly dropped whenever major risks emerged lately, with most investors turning to the safety of gold and the Swiss franc.
Bitcoin price is also at risk as spot ETF outflows continue and futures open interest continue falling. Data shows that the futures open interest dropped from over $90 billion last year to $40 billion today. Also, spot Bitcoin ETFs have shed over $8 billion in the past few months.
Additionally, technical analysis suggests that Bitcoin price may drop further in the coming weeks. It has formed a death cross as the 50-day and 200-day Exponential Moving Averages crossed each other. Also, it formed a bearish pennant pattern, pointing to more downside, potentially to the key support level at $50,000.
Such a move will lead to more MSTR stock price crash in the coming weeks since it is the biggest holder of these coins. It now holds over 717,772 coins, currently worth over $45 billion.
Strategy Share Dilution to Continue
The other main risk that may drag the MSTR stock price is the ongoing dilution as the company is using its shares to buy Bitcoin.
Data shows that the company is mostly using its common shares to buy Bitcoin, a move that will lead to more dilution. This dilution will continue as the company has $7.4 billion in outstanding shares it can sell to buy Bitcoin. It also has $20 billion in STRK stock.
Data shows the number of outstanding shares to over 300 million from over 72 million in 2021. In the past, this dilution was understandable as the company used to trade at a premium valuation. Today, the mNAV has dropped to 0.896, much lower than the all-time high of over 6.
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MSTR Stock Price Technical Analysis Points to More Downside
The weekly chart shows that Strategy stock has crashed in the past few months. This retreat started after it formed a double-top pattern at $450 and a neckline at $232, its lowest level in February last year.
It has moved below the 78.6% Fibonacci Retracement level. Also, the stock is about to form a death cross pattern, which happens when the 50-week and 200-week Exponential Moving Averages (EMA) cross each other.
The Average Directional Index (ADX) has jumped to 40, the highest level since March 3 last year. Therefore, the stock will likely continue falling as sellers target the next key support level at $100.
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