MicroStrategy Stock Could Fall 12% after Bitcoin ETF Launch

MicroStrategy’s stock price is holding at a key resistance level as Bitcoin shows some weakness on the first day of ETF trading. MSTR’s share price is trading at $740, down slightly from its August high of $797. The company has a market capitalization of more than $7 billion at this point.

MicroStrategy is a business intelligence company that provides its solutions to large companies such as Pfizer, ServiceNow, Walt Disney, and Visa, for example. The company offers solutions such as hyperintelligence, embedded intelligence, consulting, and training. The company has also released a number of blockchain tools.

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MicroStrategy and Bitcoin ETF (BITO)

MicroStrategy’s revenue has dropped from more than $513 million in 2017 to more than $480 million in 2020. Profits have also fallen from more than $90 million in that period to a loss of more than $7.5 million in 2020. In the last twelve months, the company’s total loss has reached more than $420 million as a result.

In order to save the company as well as restart its growth, the company has become one of the largest Bitcoin holders in the world. The company has bought and currently owns more than 114,042 Bitcoins.

At the current price, these coins are valued at more than $7.09 billion. This valuation means that investors value the company primarily as a bitcoin company. In particular, the company’s bitcoin holdings have proven to be profitable as the price is currently near its all-time high.

As a result, MicroStrategy’s stock price will be in the spotlight as ProShares is set to unveil its first bitcoin futures exchange-traded fund (ETF) on Tuesday. The ETF will carry the ticker symbol BITO. Analysts will be watching the inflows into the fund.

As I wrote on Monday, there is a likelihood that Bitcoin and Ethereum prices will decline after the ETF’s launch. Moreover, institutional investors already have instruments to invest in Bitcoin. Therefore, it is likely that MicroStrategy’s share price will soon see a short-term decline.

MicroStrategy share price could fall 12% after Bitcoin ETF launch

The four-hour chart shows that MicroStrategy’s stock price has been in a strong uptrend lately. It has risen more than 30% since its low in September. This share price performance has coincided with Bitcoin’s overall uptrend.

At the same time, the stock has formed a sort of cup and handle pattern. The line is about to complete the cup part of this pattern. The stock is above the moving averages of the last 25 and 50 days.

Given the close correlation between the MSTR stock price and the bitcoin price, there could be a short decline once the ETF starts trading. Therefore, the next important level to watch out for is the support at $650, which is about 12% below the current price.

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(Featured image by Hektor Ehring Jeppesen CC BY 2.0 via Flickr)

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