A year ago, Strategy (MSTR), the software company that became a pioneer in buying Bitcoin as a corporate treasury asset, hit an all-time high and bitcoin, the largest cryptocurrency, was within range of $100.00 for the first time.
How things change. The strategy is now 68% below its peak of $543, reached days after President Donald Trump’s election victory, and bitcoin fell to $83,142the lowest since April, according to CoinDesk data. On Coinbase, it fell further, falling as low as $81,385 at one point on Friday. A key level to watch remains Strategy’s average purchase price of around $74,430.
Bitcoin’s decline from the all-time high of $126,000 reached in early October pushed Strategy into an even steeper fall. The stock fell below key moving averages and technical support levels in a pullback that is the second worst since the Tysons Corner, Virginia-based company adopted its Bitcoin cash strategy in April 2020.
The drop is similar to the 69% drop that occurred between February and May 2021, when bitcoin fell from around $60,000 to around $30,000. The strategy’s biggest decline occurred after bitcoin hit an all-time high of $69,000 in November 2021. This was followed by an 84% sell-off that hit its lowest level in June 2022.
Since August 2020, the strategy has seen multiple drops of over 50%.
Nonetheless, JPMorgan warned that major stock benchmarks such as MSCI USA and the Nasdaq 100 can exclude the strategy. Such a move could trigger outflows of about $2.8 billion from MSCI alone, as index-matching vehicles shed their stock holdings. About $9 billion of the company’s market capitalization is captured by passive investments such as exchange-traded funds, analysts wrote.
Even with the recent drop, the strategy is still trading at 1.23. multiple to net asset value (mNAV), which reflects the enterprise value of the company. During the 2022 bear market, the company often traded below its mNAV, creating a discount to its underlying bitcoin holdings.
