Why MicroStrategy Stock Is Down By 8% Today
MicroStrategy Stock Falls As Bitcoin Drops Towards $32,000
Shares of MicroStrategy found themselves under strong pressure amid strong sell-off in crypto markets. Bitcoin managed to settle below the support at $35,000 and made an attempt to settle below the next support level at $32,000 after China banned crypto mining in Sichuan province.
Today, the company announced that it purchased approximately 13,005 Bitcoins for $489 million at an average price of $37,617 per Bitcoin. MicroStrategy noted that it holds approximately 105,085 Bitcoins.
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MicroStrategy is a business intelligence company, but it has emerged as one of bets on the growth of the crypto market after it started to buy Bitcoin. In this light, the dynamics of Bitcoin are a bigger catalyst for MicroStrategy compared to its main business.
What’s Next For MicroStrategy Stock?
MicroStrategy has recently completed an $500 million offering of 6.125% senior secured notes due 2028 and immediately used the proceeds to buy Bitcoin. Back in February, MicroStrategy completed a $1.05 billion offering of convertible senior notes due 2027 which was also used to buy Bitcoins.
At this point, MicroStrategy’s average purchase price is approximately $26,080 per Bitcoin, inclusive of fees and expenses, so the company has “paper profits” despite the major pullback in Bitcoin.
However, it should be noted that Bitcoin is trading not far from MicroStrategy’s average purchase price, and a move towards $26,000 may put significant pressure on MicroStrategy’s stock which remains very dependent on market sentiment.
At the current Bitcoin price of about $33,000, MicroStrategy’s Bitcoin are valued at approximately $3.47 billion, which is more than half of the company’s market capitalization.
Recent crackdown on miners in China has already led to increased volatility in crypto markets, and this volatility will likely remain intact in the upcoming trading sessions. MicroStrategy stock will be very sensitive to Bitcoin’s trading dynamics so traders should be prepared for fast moves.
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