The MSTR stock price resumed its recent downward trend, reaching its lowest level this year amid investor questions about the strategy announced on Monday. Strategy dropped to $83.50, down sharply from its all-time high of over $500.
Strategy Shareholders Face Major Risks Ahead
Investors in Strategy have gone through a difficult period as the company has continued to underperform the broader market this year. Its stock has tumbled by nearly 50% since January, while the Nasdaq 100 Index has jumped by over 20%.
At the same time, they have underperformed Bitcoin, which has dropped by 38% this year. All this happened as Michael Saylor and the team continued to dilute them by issuing substantial shares. Its share count has jumped to over 320 million from 80 million in 2021.
These investors are now bracing for more dilution as the company works to build its balance sheet following the recent STRC crash. In a statement on Monday, Saylor said the company had $2.55 billion in USD reserves, implying it sold shares worth millions of dollars last week.
At the same time, the company is planning to sell $1.25 billion in Bitcoin in the near term. This is a major issue, as it will result in a loss on these coins, since the average purchase price was over $70,000.
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There are signs that Strategy’s business model has cracked. Unlike BitMine, the company’s core asset does not and will never generate any income. BitMine can monetize its Ethereum holdings through its staking feature, earning it a 3% return.
If Strategy starts dumping Bitcoin, chances are that it will put pressure on Bitcoin, as we saw earlier this month. Bitcoin price dived below $60,000 after the company sold 32 coins. A decision to sell these coins would also incentivize other companies to sell their coins.
MSTR Stock Price Technical Analysis
The daily chart shows that the Strategy share price has dived in the past few months. It crossed the crucial support level of $103.70 on June 23rd. This was an important level as it was the lowest level on February 5 this year.
The stock has also dipped below the 50-day Exponential Moving Average (EMA), a sign that the downtrend is still strong. Also, the Relative Strength Index (RSI) has continued its downtrend and is now near the oversold level.
Therefore, the shares will likely continue to fall in the near term, with the next target to watch at $50. This target is about 40% below the current level.
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