Strategy, the company formerly known as MicroStrategy, experienced significant stock declines on February 25, 2025. Shares fell by 5.65% after Bitcoin, the digital currency it heavily invests in, dropped below the $90,000 threshold. The stock closed at $282.76, aligning with broader declines across related crypto stocks, which also faced downward pressures.
On the same day, Bitcoin's price tumbled to as low as $87,630, marking its lowest level over the previous three months, with an 8% decline just on one day. This rapid decrease has sent ripples through the cryptocurrency markets and companies heavily tied to Bitcoin, raising alarms for investors.
MicroStrategy, under the direction of CEO Michael Saylor, holds more than 2% of Bitcoin's total supply and recently expanded its portfolio with the addition of 20,356 Bitcoin, amounting to nearly $2 billion at the time of purchase. The company's status as the largest corporate holder of Bitcoin has now come under scrutiny as market conditions worsen.
Market analyst Miles Deutscher noted, "The lower this number goes, the harder it will be for Saylor to raise more capital for BTC purchases." This statement reflects the newly observed premium ratio between the company's market capitalization and its Bitcoin assets, which plunged from 3.4 during more favorable conditions last November to just 1.6 by February 25. This drastic shift implies heightened challenges for raising capital needed for Bitcoin acquisitions, as investors are now less willing to pay a premium for MSTR stock.
This turmoil hasn’t just affected Strategy; other stocks linked to cryptocurrency have felt the heat. Cryptocurrency exchange Coinbase saw its shares drop nearly 6% during premarket trading, and Riot Platforms fell around 5%. The overall cryptocurrency sector has faced similar declines, with larger digital coins like XRP dropping over 14%, Ether more than 11%, and Solana falling by 15%.
Investors are increasingly linking the downward trend within cryptocurrency to broader weakening trends across traditional stock markets. For example, tech stocks, particularly within the Nasdaq, have experienced notable deterioration, with the index falling more than 4% since February 18. Compounding this market suspicion is the strengthening of the Japanese yen, which recently surged to 149.76 against the dollar, its strongest position in nearly three months. Analysts have cautioned against the potential fallout, noting how similar conditions triggered Bitcoin's plunge from approximately $65,000 to $50,000 just last year, following movements of the yen.
Beyond immediate market concerns, the cryptocurrency sector has been rocked by severe operational disturbances, including significant security breaches, like the $1.5 billion theft from Dubai-based exchange Bybit. Such events continue to sour investor sentiment across the industry; hence, Strategy's stock is now under increased scrutiny and pressure based on Bitcoin's market performances.
Analysts have noted it’s also important to reflect on Strategy’s strategy revolving around Bitcoin. With substantial holdings, any fluctuation in cryptocurrency value has immediate ramifications for the company’s stock. Saylor’s leadership and ability to navigate these turbulent waters will be key going forward.
Peter Schiff, a noted economist and Bitcoin skeptic, expressed his concerns over Strategy’s strategy, stating, "The discount will keep widening until bankruptcy forces the sale," hinting at potential long-term risks linked to the company’s leveraged Bitcoin investment strategy. Schiff pointed out possible scenarios where selling its Bitcoin could backfire, driving down market prices for both Bitcoin and MicroStrategy shares.
Strategy's stock has experienced astounding volatility, plunging nearly 48% since its all-time high reached on November 21, 2024, which has led to a whopping $70 billion being wiped from the company’s valuation. Presently, the stock is testing the important 200-day Simple Moving Average, reflecting bearish market indicators as this key support level may determine its future direction.
Despite the present gloom for cryptocurrency firms, many industry players are still embracing the paradigm of placing Bitcoin on balance sheets; companies like Metaplanet and Semler Scientific have followed Saylor's foray. Their decisions have spurred growth and appreciation within their stock prices over the past year, showcasing another side of public sentiment contrasting Strategy's struggles.
For now, investors eye Bitcoin’s price movements as pivotal. Recovery from the recent lows could potentially uplift Strategy’s stock and restore the premium measures, allowing them to resume their Bitcoin acquisition objectives effectively. The question remains: can Bitcoin rebound from this downturn and breathe new life (and valuation) back to Strategy?