MSTR stock price continues to plunge, with Peter Schiff, the popular goldbug, warning that Strategy’s collapse could be bigger than FTX. Strategy dropped to $82, down sharply from its all-time high of over $400. This plunge has brought its market cap to below $40 billion.
Peter Schiff is Warning About Strategy
Strategy has faced a mountainload of challenges this year. Bitcoin price has slumped from a record high of $126,300 to below $60,000 today. This retreat means that Strategy is now operating at a loss, as its average Bitcoin buying price was $64,000.
Most recently, the company’s main challenge has been the plummeting value of its preferred STRC and STRD stocks. These stocks have plunged from par as investors have wondered whether the company has the financial resources it needs to pay dividends and service its debt.
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Strategy has $1.4 billion in cash on hand, well below the $1.7 billion it needs to pay dividends. This is important because Strategy’s Bitcoin holdings don’t generate any income. Its only income comes from its software business, which does not make much money.
Michael Saylor has no good solution in the near term. For one, it can continue selling shares to fund its dividends. Such a move will lead to more dilution, pushing the MSTR stock price lower.
The alternative scenario is where it sells its Bitcoin to pay its dividends. In a statement, Peter Schiff warned that the company cannot afford to do so, citing a 2024 X post he made. Most notably, he warned that even pausing Bitcoin purchases will push stocks and Bitcoin lower.
In another post, Schiff warned that Strategy’s collapse will be worse for Bitcoin than FTX’s collapse. FTX collapsed in 2022, costing investors billions of dollars and putting Sam Bankman-Fried in prison. Most of FTX’s clients later recovered the funds through the bankruptcy process.
MSTR Stock Has Become Highly Oversold
Technicals suggest that the ongoing MSTR stock price is in a strong freefall and is now hovering near its lowest level in years. This downtrend is gaining momentum as the Relative Strength Index (RSI) has dropped to the extreme fear zone of 23. Also, the Average Directional Index (ADX) has continued rising.
Therefore, there is a likelihood that the price will continue falling, potentially to the key support level of $50. This retreat will then lead to a strong bullish reversal in the longer term as investors buy the dip. This recovery will take time and will depend on how Strategy handles its cash position.
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