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The MSTR stock price jumped by over 3% on Monday as Bitcoin and the broader crypto market bounced back. It rose to $170, up by nearly 10% from its lowest point this month. Still, there are a few reasons why the MicroStrategy share price will reverse and resume the bearish trend.
Strategy Stock Jumped as Bitcoin and Altcoins Rebounded
The main reason why the MSTR stock price jumped on Monday is that Bitcoin and other coins rose. The Bitcoin price rose to $90,000, a 12% increase from its lowest level this month.
It jumped as investors bought the recent dip, which was triggered by the Bank of Japan (BoJ). In a statement on Friday, the bank announced a 0.25% interest rate hike to a 30-year high of 0.75%.
In theory, the BoJ rate hike was bearish for Bitcoin and other cryptocurrencies because of its impact on the carry trade. However, this rate hike was fully priced in, which explains why Bitcoin and other assets like the Nikkei 225 Index jumped and the Japanese yen slipped.
However, there is a risk that the Bitcoin price will resume the downward trend in the coming days or weeks. One of the main risks is that the coin has formed a bearish pennant pattern, which is characterized by a vertical line that resembles an inverted flagpole. This pattern leads to more downside over time.
The coin formed a death cross pattern, which happens when the 50-day and 100-day Exponential Moving Averages (EMA) cross each other. It also remains below key indicators like the Ichimoku cloud, Supertrend, and the Parabolic SAR.
Therefore, the ongoing Bitcoin price rebound will likely be temporary and that it will resume the downward trend, potentially to the November low of $80,565. A drop below that level will point to more downside, potentially to the psychological level at $75,000, which is the lowest level in April this year.
Such a move will likely lead to a further sell-off of the company’s stock, as it is known for its substantial Bitcoin holdings. It currently holds 671,258 coins, worth over $60 billion. A Bitcoin price drop to last month’s low of $80,565 will bring its Bitcoin holdings to $53 billion.
MSTR Stock Price Technical Analysis Points to a Dive
Meanwhile, the MSTR stock price has also formed several bearish chart patterns that point to more downside in the near term. For example, like Bitcoin, the coin has slowly formed a bearish flag pattern on the weekly chart.
It is now in the flag section of this pattern. Additionally, the stock remains below the important level at $230, its lowest level since March 10 this year. This price is also the neckline of the double-top pattern at $455. A double-top is one of the most common bearish continuation patterns in technical analysis.
The stock has moved below the Major S&R pivot point of the Murrey Math Lines tool and is now hovering slightly above the strong, pivot and reverse.
MicroStrategy has moved below the 50-week Exponential Moving Average, while the MACD and the Relative Strength Index (RSI) have continued moving downwards. Therefore, the stock will likely continue falling as sellers target the next key support at $125.
MicroStrategy Has Other Major Risks Ahead
The MSTR stock price may continue to decline as the company faces significant risks ahead. For example, the company is facing a risk where the enterprise value NAV multiple will continue falling and potentially move below 1. It has now dropped to 1.05, removing the premium that existed a few months ago.
In a recent statement, the company maintained that it will not sell its Bitcoin holdings to pay its preferred shares dividend and debt. It pointed to its $1 billion in cash. In a statement on Monday, the company announced that it had increased its cash holdings to $2.19 billion.
Second, MSCI, a major player in the index industry, is considering removing Strategy and other digital asset treasury companies from its indices, a move that may lead to forced selling of the stock.
Third, Strategy is one of the most dilutive companies in the United States, selling shares worth millions of dollars a week to accumulate Bitcoin. All these fundamental and technical factors may cause the MSTR stock price to decline in the coming weeks.
