Strategy stock retreated more than 5% on Friday as its recent momentum faded. The shares fell to $136, which is 20% below their September high and their lowest level since September 18. The pullback may continue as Bitcoin loses traction and dilution concerns gain steam.
Strategy stock falls as Bitcoin loses traction
MSTR stock dropped as the recent Bitcoin rally lost traction. After peaking at $87,270 in September, it dropped to the current $80,980 as demand in the futures and ETF market waned.
Spot Bitcoin ETFs have had over $534 million in outflows this month, a big reversal from the $2.6 billion inflows experienced in September and the $3.52 billion they added in August. In total, these funds have had cumulative inflows of $56.9 billion, with BlackRock’s IBIT having $66 billion in assets.
Bitcoin’s futures open interest has also dropped modestly in the past few days. These inflows dropped to $52 billion from last month’s high of $62 billion. Falling open interest is a sign that demand among speculative investors is fading. The Coinbase Bitcoin Premium Index has remained in the red since September 26.
Strategy is usually affected by Bitcoin’s price action because of its vast holdings. It holds 848,250 coins currently valued at $68.6 billion.
For investors, there are signs that the company will continue to dilute its investors since it uses its stock to buy Bitcoin. Its outstanding shares have jumped to 352 million from 93.2 million in 2022.
Bitcoin price may drop further this year
Technicals suggest that BTC price has dropped in the past few weeks, moving from $87,270 late September to the current $80,890. It formed a double-top pattern and a neckline at $82,300. This pattern often leads to a strong bearish breakout.
The coin has moved below the important support level of $82,233, its highest level on May 10 this year. At the same time, it has moved below the 50-day moving average, while the Relative Strength Index (RSI) has continued falling.
These technicals suggest that the coin may drop further towards the support of $74,933, its lowest level in September. Such a move would bring the value of Strategy’s coins to $63.4 billion.
BTC price chart | Source: TradingView
MSTR stock price technical analysis
The daily chart shows that Strategy peaked at $171.40 on September 22 and is currently at $134. This retreat has coincided with the ongoing Bitcoin sell-off.
Strategy has already dropped below the 25-day moving average and the descending trendline that links the highest point in May, September, and October.
The two lines of the MACD indicator have made a bearish crossover and are pointing downwards. Therefore, the stock will likely continue falling, potentially to the psychological level of $100.
The bearish outlook will be invalidated if Strategy jumps above the resistance level of $150. A move above that level will point to more gains, potentially to $200.
MSTR stock chart | Source: TradingView
Analysts have maintained a bullish outlook for MSTR. For example, Cantor Fitzgerald has placed a target of $208, while Citigroup has a target of $240. Bernstein believes that the stock will jump to $350, while B.Riley sees it rising to $195.
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