MicroStrategy stock price falls 44% from peak, is the "crypto Fed" narrative over?
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MicroStrategy stock price falls 44% from peak, is the "crypto Fed" narrative over?
Can the "Crypto Fed" Recapture Its Glory?
Navigating Web3 tides with focused insightsBy Pzai, Foresight News
As a company whose core strategy centers on holding Bitcoin as reserves, MicroStrategy (MSTR) has in recent years gained strong favor among U.S. stock investors due to its unwavering support for Bitcoin and the fervent market environment surrounding the cryptocurrency.
However, since reaching a record high of $589 on November 21, MSTR's share price has fallen more than 44% to $300, with its market capitalization dropping 34% just over the past two weeks. As a standout crypto-linked asset in the U.S. equity market, even subtle shifts in market conditions have translated into sharp stock volatility. Ultimately, can the narrative of MicroStrategy as the "Fed of Crypto" sustain its former glory?
Peak Retreat
Due to its business model, MicroStrategy’s stock price is highly correlated with Bitcoin’s price. In December 2024, Bitcoin declined approximately 10% from its peak of $108,000 to around $97,000. This correction directly impacted the balance sheet value of MicroStrategy, dragging down its stock performance. For a long time, MSTR shares have traded at a premium relative to the value of its Bitcoin holdings. In November 2024, this premium reached as high as 3.5x, but by early 2025 it had contracted to 1.6x. The shrinking premium suggests weakening investor confidence in the “leveraged Bitcoin investment” narrative.
Correlation between MSTR stock price and Bitcoin price (benchmark: Binance BTCUSD pair)
As of December 2024, MicroStrategy held approximately 446,000 bitcoins, valued at around $43 billion, making it the largest corporate holder of Bitcoin globally. This massive position has secured its significance within the cryptocurrency market, leading to its inclusion in the Nasdaq index that same month—making it one of the few crypto-related assets in the benchmark.
Outside of MSTR, however, global corporations remain relatively cautious toward Bitcoin as an emerging asset class. Despite Bitcoin’s potential for high returns and portfolio diversification benefits attracting some corporate interest, its high volatility, regulatory uncertainty, and misalignment with traditional corporate treasury strategies have led most companies to adopt a wait-and-see approach or only limited experimentation. For example, Microsoft shareholders rejected a Bitcoin investment proposal in December 2024, citing Bitcoin’s volatility as incompatible with corporate objectives for stable returns. Markus Thielen, founder of 10x Research, noted in a client report: “With MicroStrategy’s stock down 44% from its peak, and other companies adopting Bitcoin as a reserve asset only at much smaller scales, the bullish case driven by broad corporate adoption appears to be losing momentum.”
Leverage Under Pressure
MicroStrategy has funded continuous Bitcoin accumulation through stock offerings and convertible bond issuances. During Bitcoin bull markets, this strategy was hailed as a “fiat-to-Bitcoin flywheel,” attracting significant investor enthusiasm. Company founder and CEO Michael Saylor has repeatedly stated publicly that Bitcoin is “digital gold” and the best hedge against inflation, while actively advocating for U.S. businesses and government institutions to embrace Bitcoin.
Given that MicroStrategy’s business model is heavily dependent on Bitcoin’s price, any fluctuation in Bitcoin’s value significantly impacts its stock. After Bitcoin hit new all-time highs, some investors took profits, putting downward pressure on MicroStrategy’s share price. On the policy front, headwinds also emerged. The Federal Reserve signaled a hawkish stance during its December 2024 meeting, suggesting further rate hikes to combat inflation. This policy shift dampened demand for risk assets, and MicroStrategy—as a leveraged proxy to Bitcoin—was especially affected.
The company’s leveraged strategy amplified gains during rallies but increases risks during downturns. Concerns over its debt load and refinancing capacity have intensified, particularly if Bitcoin prices continue to fall, potentially exposing the company to greater financial strain. Amid Bitcoin’s correction and weakening market sentiment, MicroStrategy’s investment thesis faces short-term challenges. Rising concerns about its high valuation premium and leverage risk have contributed to the sharp decline in its stock price.
Outlook
It is clear that MicroStrategy’s stock performance will remain highly tied to Bitcoin’s price trajectory. Its status as the “Fed of Crypto” is currently under pressure due to Bitcoin’s price pullback and shifting market sentiment. However, its long-term potential still hinges on Bitcoin’s future price movement and the company’s ability to execute its capital strategy. Should Bitcoin resume an upward trend—especially amid market expectations that it could gain broader acceptance as a store of value during a potential Trump administration—MicroStrategy’s continued accumulation strategy may once again attract investor interest.
As investor valuations of MicroStrategy become more rational, the de-leveraging of its stock price may bring it closer to the actual value of its Bitcoin holdings, rather than sustaining a high premium. This normalization process could lead to further price adjustments, but it may also present better entry opportunities for long-term investors.
Moreover, new accounting rules effective in 2025 will allow MicroStrategy to report its Bitcoin holdings at fair value, which could significantly boost its reported net income and make it more attractive to institutional investors—even potentially paving the way for inclusion in the S&P 500 index (though this remains unlikely). While MicroStrategy’s stock may continue to face near-term pressure, its solid position as the largest corporate Bitcoin holder still carries strategic weight in the market.
At the time of writing, MSTR’s share price stood at $300.01. As the Bitcoin market gradually recovers, improved market sentiment is likely to reflect in the stock price. If Bitcoin re-enters a sustained uptrend, MicroStrategy could once again become a focal point for investors.
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