MSTR stock price analysis: Why is Strategy falling, and will it rebound?

The MSTR stock price has been in a strong downtrend, mirroring the performance of other Digital Asset Treasury (DAT) companies like Metaplanet, American Bitcoin, MicroCloud Hologram, and Semler Scientific. Strategy shares were trading at $241 on Friday, much lower than the year-to-date high of $456. It is hovering at its lowest level since November last year. So, what next for the OG of the treasury industry?

MSTR stock price technical analysis

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The daily chart shows that the Strategy share price has been in a strong downtrend as it formed a series of lower lows and lower highs. It has now formed a death cross pattern as the 50-day and 200-day moving averages crossed each other.

The stock has moved below the Ichimoku cloud indicator, a sign that bears remain in control. Also, it has moved below a crucial indicator known as a Supertrend. Top oscillators like the Relative Strength Index (RSI) and the MACD indicators have also continued falling.

The MicroStrategy stock price has also formed an inverse cup-and-handle pattern, which often leads to more downside over time. This pattern is made up of a horizontal support level and a rounded top.

Therefore, the stock will likely continue falling in the coming months, with the next key level to watch being at $200. On the other hand, a move above the important resistance level at $300 will invalidate the bearish outlook.

MSTR stock chart | Source: TradingView

Why the Strategy stock price is falling

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The MSTR stock price has been in a strong downtrend in the past few months for several reasons. First, Bitcoin, its top asset, has continued its strong downtrend this month. It has dropped from a high of $126,300 in September to the current $101,000.

Bitcoin’s performance is notable because Strategy is the biggest holder in the industry. It holds 641,205 coins currently valued at over $65 billion. At Bitcoin’s peak, the company’s assets were valued at over $80 billion. Still, Strategy’s Bitcoin purchases have been profitable, with a 37% return.

The stock has crashed because of its valuation concerns. Ideally, Strategy has always been valued at a premium of its Bitcoin holdings, which has not made sense.

Strategy’s business model is relatively simple. It has its technology business, which is normally valued at about $1 billion. The rest of its business is its Bitcoin holdings, which are valued at $65 billion. It normally carries little cash and has over $8 billion in debt.

Strategy has a market cap of over $69 billion and an enterprise value of $84 billion. This 1.29 premium is usually hard to explain, which explains why it continues to drop. A falling premium will always make it hard for the company to raise cash.

Additionally, the Bitcoin treasury industry has generated negative publicity in the past few years. That’s because it attracted most companies that were going through a rough time, with many expecting it to replicate Strategy’s approach. This includes companies like Metaplanet, Trump Media, and GD Culture Group.