MicroStrategy’s stock has faced significant challenges recently, even as the company maintains its aggressive Bitcoin acquisition strategy. On February 23, MicroStrategy purchased an additional 592 Bitcoin for approximately $40 million, bringing its total holdings to 717,722 Bitcoin, with an average cost basis of $76,020. Normally, such substantial investments are seen as a bullish signal, indicating strong long-term confidence in Bitcoin. However, this latest purchase did not halt the downward trend of MicroStrategy’s stock price.
The stock saw a steep drop of over 9% on February 24, although it rebounded by 16% the following day, showing fleeting signs of investor enthusiasm. Despite this brief resurgence, the stock has now declined again by over 3%, marking a total decline of about 4% since its peak last Friday and a staggering 63% over the past six months. This decline raises ongoing concerns about a potential deeper breakdown, particularly as the company continues to accumulate Bitcoin.
MicroStrategy’s performance is tightly intertwined with Bitcoin’s fluctuations. After the company’s latest purchase, the stock experienced a slight rally to $137 on February 25, mirroring Bitcoin’s rise from $64,500 to $69,400. However, as Bitcoin prices cooled, so did MicroStrategy’s stock value, reinforcing the company’s position as a leveraged proxy for Bitcoin investments. When Bitcoin experiences weakness, MicroStrategy tends to fall even faster, suggesting that its market valuation is heavily reliant on projected gains from its Bitcoin holdings.
Additionally, signs of institutional investors’ sentiment toward MicroStrategy stock are becoming increasingly concerning. The Chaikin Money Flow (CMF) indicator, which assesses buying and selling pressure based on price and volume, has shown troubling signs. When above zero, it suggests accumulation by large investors, while a reading below zero indicates selling. Recently, the CMF has flatlined near the zero line, indicating an indecisive stance among institutional investors following the latest Bitcoin purchase.
Previously, the CMF had shown a bullish divergence, indicating that institutional investors were buying during price dips, which contributed to a 33% rebound in the stock price between early February and late February. However, the current lack of upward momentum from the CMF suggests that confidence in MicroStrategy’s stock has waned amid its continued Bitcoin buying.
Compounding these concerns, the Relative Strength Index (RSI), which tracks momentum, indicated a bearish divergence prior to the recent drop. This pattern—where stock prices rise while momentum indicators weaken—often foreshadows significant corrections. Multiple instances of such divergences have previously resulted in sharp declines for the stock.
MicroStrategy’s stock has now broken below a bear flag pattern, typically signaling a continuation of the downtrend. The most crucial support level lies around $119; should this fail, subsequent support levels are expected at $106 and potentially $85. According to Fibonacci retracement levels, the stock could realistically target the $70 zone if further declines occur.
For a reversal in this downward trend to be confirmed, the stock would need to reclaim and stabilize above $139, though a complete turnaround would require breaking through $155 to invalidate the current bearish structure. Until such resistance levels are breached, MicroStrategy’s stock appears vulnerable to further declines, particularly in light of ongoing Bitcoin weakness.
