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Michael Saylor’s MSTR stock price has plunged in the past few months, moving from a high of $543 in November last year to $335 today. This crash could accelerate this year as Strategy faces numerous risks, including its technicals and fundamentals.
MSTR Stock Price Death Cross Points to a Crash
The first major risk that the MSTR stock price faces that it has just formed a death cross pattern on the daily chart as the 50-day and 200-day Weighted Moving Averages (WMA) have formed a bearish crossover.
Historically, this pattern normally leads to a strong bearish breakdown as the near-term momentum has prevailed.
A good example of this is what happened in September last year when the Strategy stock price formed a golden cross, which is the opposite of the death cross pattern. That price action led to a 290% surge to a record high.
Additionally, the MSTR stock price has formed a bearish flag pattern comprising a vertical line and consolidation. It resembles an upside-down hoisted flag, and often leads to more downside.
If this happens, the next key support level to watch will be at $250, which is about 25% below the current level. The bearish outlook will become invalid if it jumps above the resistance level at $400.
Bitcoin Price Wedge Pattern Points to a Bear Market
Meanwhile, the MSTR stock price may crash if Bitcoin price plunges, which is a possibility as it has formed bearish patterns on the weekly chart.
The first major issue is that the Bitcoin price is slowly forming the rising wedge pattern on the daily chart. This pattern is made up of two upsloping and converging trendlines. In most cases, this pattern normally leads to a strong bearish breakout when the two lines are about to converge.
Oscillators also show that the coin has formed a bearish divergence pattern. A divergence forms when an asset is in an uptrend while its oscillators are in a downtrend.
In this case, the Relative Strength Index (RSI) has formed a descending channel since February last year. The MACD has also moved downward since earlier this year.
The bearish divergence pattern and the rising wedge points to a strong bearish breakout. Such a move would hurt Strategy, a company whose business model is based on Bitcoin accumulation.
Falling NAV Multiple is a Risk for MicroStrategy Stock
The other risk that the MSTR stock price faces is that the market net asset value (mNAV) multiple has plunged in the past few months.
According to Bitcoin Treasuries, the multiple has plunged from last year’s high of 3.4 to 1.3 today. This drop is risky for two main reasons.
First, a low mNAV ratio will make it difficult for the company to raise money to buy more Bitcoin. Indeed, for a long time, Saylor’s rule was that he would not sell equity as long as the mNAV was below 2.5.
He changed this rule in August, leading to the risk that he will mostly use the at-the-market (ATM) approach to raise money instead of the preferred shares. This approach will intensify the company’s share dilution.
The other risk is that the stock will become less attractive to shareholders. In the past, investors used to buy the shares because MSTR was a leveraged bet on Bitcoin. If this premium is not there, then the company will not be a good investment.
Bitcoin Treasury Industry is Highly Saturated
Meanwhile, MSTR stock price thrived in the past because it was the only company in the industry. That exclusivity made it a more valuable brand.
Today, however, there are over 170 companies with over 1 million coins. Some of the other notable ones are firms like Metaplanet, Bullish, Semler Scientific, and GameStop.
MicroStrategy stock price has crashed in the past few months, coinciding with the ongoing performance of other Bitcoin treasury companies. These four risks mean that it may have more downide in the near term.
