2 reasons MSTR stock fell as Bitcoin price rallied

MicroStrategy stock price is down 27% from this year’s high even as Bitcoin hits a record high.

MSTR shares were trading at $390 on December 6 and continued the decline that began on November 21, when the stock reached $541. Despite this pullback, MicroStrategy remains one of this year’s best-performing stocks, up over 500% and with a market cap of more than $91 billion. It is also one of the top gainers in the Russell 2000 index.

There are two possible reasons for the stock’s decline this month. First, this decline is due to investors taking profits taking advantage of the rise.

Second, investors are likely concerned about its valuation, which is around $91 billion. This is a huge premium considering MicroStrategy holds 402,100 tokens worth just under $40 billion. So there’s a $50 billion gap that the original struggling data analytics business can’t fill.

For this reason, some investors believe that the company’s valuation will eventually decline, bringing the valuation closer to Bitcoin (BTC) assets.

Still, most Wall Street analysts are optimistic the stock will move further upside. According to Yahoo Finance, some of the most bullish analysts are from Cowen, Barclays, Benchmark and Bernstein. The average estimate for the stock is $492, above the current price of $390.

MicroStrategy’s shares also reflect the performance of other companies with exposure to Bitcoin. Marathon Digital, the second-largest Bitcoin holder, is down 14% from its November peak, while Coinbase, Riot Platforms and Hut 8 Mining also experienced pullbacks.

What’s next for MSTR shares? MSTR stock chart | Source: TradingView

MicroStrategy shares have pulled back but remain above the ascending trend line connecting their lowest waves since November 11. It is also trading above the 50-day and 100-day moving averages, signaling potential support for further gains.

It also bottomed out at the strong pivot reversal point of the Murrey Math Lines tool. Therefore, if Bitcoin continues to rise as analysts expect, the stock will likely rebound.

If this happens, the stock will likely continue to rise as bulls target the all-time high of $540. A break above this level would signal more gains, potentially to the $625 overshoot level.

Conversely, a decline below the ascending trend line could cause the stock to undergo a mean reversal and drop to the 100-day moving average at $240. This price coincides with the main S&R level of the Murrey Math Lines.