It is a tough time for Michael Saylor. MSTR stock has plunged from a record high of $545 to $102 today, costing him and his investors billions. Worse, he has abandoned his “never sell” mantra and started unloading his coins at a loss. So, is the current situation a sign that Strategy’s approach has failed?
Michael Saylor’s Strategy Approach Has Failed
There are signs that bears who shorted Strategy have been vindicated. On Monday, the company announced that it sold Bitcoin worth over $200 million. This is just the beginning as the company plans to raise over $1.5 billion in cash, which it will use to pay its shareholders as dividends.
Worse, the company is selling these coins at a loss since Bitcoin is trading at $63,000, much lower than the average buying price of $74,000.
This selling is raising concerns on whether Michael Saylor’s Bitcoin strategy can be sustainable in the long term. This strategy involves buying Bitcoin by selling shares, and hoping that its surge will boost its BTC per share over time.
READ MORE: Crypto Hacks Are Rising: Here Are the Biggest Ones in the Last 12 Months
This approach worked well when Bitcoin was in a bull run. Today, this has changed as BTC has dropped by over 50% from its all-time high.
At the same time, Saylor raised cash by launching several preferred stocks, which it needs to pay dividends to. In total, the company requires over $1.7 billion a year to pay dividends. It also needs cash to pay its debt as it did two months ago.
The main issue with this strategy is that Bitcoin does not generate a return and its software business does not generate adequate revenue to cover the dividends.
Saylor hopes that Bitcoin will rebound over time. If this happens, it will make sense for it to raise cash by selling shares or even selling its Bitcoin.
This approach is different from Tom Lee’s BitMine, which is accumulating Ethereum, which generates a 3% return annually from staking. The staking revenue will be worth hundreds of millions of dollars even if ETH drops to $500, making it possible for the company to pay BMNP’s dividends.
Saylor’s issue is that Bitcoin does not pay anything, and as we have seen recently, it does not always go up.
MSTR Stock Price Technical Analysis
Strategy stock chart | Source: TradingView
The daily chart shows that the Strategy stock has been in a strong sell-off in the past few months. It recently dropped below the key support level of $101.73, its lowest level in February. Notably, it has done a break-and-retest pattern, a common bearish continuation sign.
The Average Directional Index (ADX) has dropped to 28 from a high of 32.7, a sign that the recent recovery is losing steam. Therefore, there is a risk that the stock will resume the downtrend and hit the key support of $70.
READ MORE: MARA Stock Under Pressure: Short Sellers Target Bitcoin Miner’s AI Ambitions
