MSTR Stock Rises After Increased Bitcoin Purchases

In a recent trading session, MSTR stock surged nearly 4% as Bitcoin made a notable recovery, paired with Strategy, previously MicroStrategy, ramping up its Bitcoin purchases while also diluting shareholder equity.

Key Takeaways

MSTR stock rose nearly 4% as Bitcoin prices rebound.
Strategy purchased 1,287 Bitcoins, increasing its total to 673,783.
The company's Bitcoin holdings are valued at over $62 billion, surpassing its market cap.
Concerns exist regarding shareholder dilution, as outstanding shares exceed 300 million.
Technical indicators point to a bearish trend for Bitcoin and MSTR stock.

MSTR stock jumps as Strategy buys more Bitcoin - 1

The stock price of Strategy, currently trading at $163.25, has moved up modestly from this year’s low of $155 but remains approximately 70% lower than its peak. The firm reported the acquisition of 1,287 Bitcoins, bringing its total holdings to 673,783 Bitcoins, which are valued at over $62 billion. The recent stock activities raise concerns about shareholder dilution and technical indicators suggesting potential further declines.

MSTR Stock Gains Amid Bitcoin Recovery

The MSTR stock has witnessed a significant uptick, trading at $163.25, slightly up from its earlier low of $155 this year. Despite the recent gains, the stock is still about 70% off its all-time high.

In its latest announcement, Strategy reported acquiring 1,287 Bitcoins, boosting its total Bitcoin holdings to 673,783. These holdings are worth over $62 billion, exceeding the company's market capitalization of around $45 billion and its enterprise value of $59 billion. Notably, these purchases came after Strategy issued common shares valued at over $1.9 billion, and it retains more than $11.5 billion in reserves in case of further sales.

Additionally, the company increased its cash reserves by $62 million. As the mNAV ratio slips below 1, Strategy intends to use this cash for paying dividends and servicing its debt obligations.

Bitcoin's price has been capturing attention, having rallied to a high of $92,500, up 15% from its lowest point in December. Furthermore, the Crypto Fear and Greed Index has shifted away from fear, while futures open interest has climbed to $140 billion.

Risks and Challenges for MSTR Stock

However, Strategy still faces considerable risks. One key concern is ongoing shareholder dilution, as the number of outstanding shares has surged to over 300 million, a significant rise from below 100 million in 2022.

Another risk stems from Bitcoin's current market behavior. As illustrated in the Bitcoin price chart, the cryptocurrency has developed a bearish flag pattern, consistently trading below the 100-day moving average and the Supertrend indicator. These trends suggest that further declines may be on the horizon.

Bitcoin price chart | Source: crypto.news

Technical Analysis Indicates Potential Drawbacks

Technical indicators also suggest significant challenges for Strategy. The stock price is currently below the critical support level of $230.38, a low it hit last March. Similar to Bitcoin, MSTR stock is below all moving averages and the Supertrend indicator.

MSTR stock chart | Source: TradingView

The stock has not only remained below the key resistance level at $250, but it is also expected to continue its downward trend as sellers aim for a critical support level around $10.