Thomas Daniels
After Bitcoin fell below $90,000, Strategy Inc. (previously MicroStrategy) saw its shares (MSTR) plunge more than 5% as its premium to Bitcoin holdings fell to 1.6.
Yahoo Finance reports that MSTR’s stock dropped 5.65% during pre-market trading, ending the day on February 25 at $282.76. Bitcoin’s steep loss, which saw the cryptocurrency fall as low as $87,630 during the day, was quickly followed by the dip.
MSTR’s Premium Drops as Bitcoin Prices Drop
Along with having an effect on MSTR’s shares, the decline in the price of Bitcoin also drastically lowered the company’s premium, or the ratio of MSTR’s market capitalization to its Bitcoin holdings. Since late 2024, Michael Saylor’s Strategy Inc. has amassed more over 2% of the total supply of Bitcoin, making it the largest corporate holder of the cryptocurrency. The corporation most recently purchased 20,356 Bitcoin, which was worth almost $2 billion at the time of purchase.
Miles Deutscher, a cryptocurrency expert, claims that MSTR’s premium market cap-to-Bitcoin holdings ratio has drastically decreased, going from 3.4 in November to 1.6 on February 25. This suggests that rather than trading at a substantial premium, MSTR’s stock price now more closely reflects the true value of its Bitcoin reserves.
The Bitcoin Strategy’s Upcoming Obstacles
According to a recent research by Deutscher, “Michael Saylor will find it more difficult to raise additional capital for Bitcoin purchases the lower this number goes.”
Unless Bitcoin prices rebound, Strategy Inc. may find it more challenging to issue shares or use its stock as leverage to raise money for further Bitcoin purchases as MSTR’s premium declines. Additionally, investors might be hesitant to pay more than the Bitcoin holdings’ intrinsic worth, which would further restrict MSTR’s capacity to raise capital.
Prospects for the Bitcoin and MSTR markets
Concerns over additional downside risk have been raised by Bitcoin’s 6.78% drop on February 25. Matrixport analysts have cautioned that a larger correction in Bitcoin is possible, particularly given the low trading volume and lackluster purchasing pressure from investors looking to profit from the decline.
Since the price of Bitcoin is still erratic, MSTR’s stock can also see significant swings, highlighting the close relationship between the two assets.
