- Strategy Incorporated continues to deteriorate, with shares collapsing despite attempts to stabilize sentiment.
- Mounting losses, weakening Bitcoin prices, and worsening fundamentals leave the stock vulnerable, with traders largely treating it as a short-term, high-risk vehicle.
Strategy Incorporated (formerly MicroStrategy)
We're in the trading session on Tuesday; we have seen an attempt by Strategy Incorporated to turn things around. But obviously, this is a market that is simply falling apart. Michael Saylor’s MicroStrategy, now called Strategy Incorporated, has lost 40% this year and is now worth less than the Bitcoin it holds. In a huge twist of irony, the company has started a US dollar reserve and has even mentioned that if the price keeps dropping, they may have to sell some of their Bitcoin. This is a market that is approaching a major support area that extends all the way to the $120 level. Quite frankly, I think this is a market that could get a vicious recovery, it could get a nice dead cat bounce, but at best, this is a trading vehicle. Long gone are the days when traders just simply YOLO calls in this stock, and you've seen the institutions completely walk away from it.
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Deteriorating Fundamentals and Market Psychology
This makes sense because sooner or later, a company actually has to produce something, which is the weak link here. Simply buying Bitcoin isn't the way to go. And even if it were, there are plenty of other companies out there creating Bitcoin treasuries now. And this means that Strategy Incorporated is no longer unique. I suspect that before this is all said and done, something horrible happens to this company, and it plunges rapidly. I would change my mind if we can stay above the $250 level for a few weeks, but really, at this point in time, it's worth noting that we gapped higher on Tuesday only to turn around and give up quite a bit of the gains. This shows just how weak this market is, even though volume spiked during the day.
The market is trying to react to a $1.4 billion cash reserve announcement for dividends and, more importantly, debt. And also simultaneously, the lower annual earnings target was announced due to declining cryptocurrency values, specifically Bitcoin. So, with all of this, I think this is a stock that might give you a trading opportunity, but I'm more apt to short it or buy puts on any type of strong bounce.
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