MicroStrategy loses $30B in four days: Is the Bitcoin bet proving risky?

• MicroStrategy faced a record 35% market cap drop amid Bitcoin’s correction.
• Retail investors poured $100M into MicroStrategy shares despite ongoing market volatility.

Once celebrated for its soaring stock prices and bold Bitcoin [BTC] investment strategy, MicroStrategy is now facing its steepest four-day market capitalization drop ever recorded.

The company’s valuation plunged by over 35% from its 21st November peak, wiping out more than $30 billion.

On the 26th of November, MicroStrategy’s stock [MSTR] endured a further 12% slide, closing at $353, as selling pressure intensified.

This dramatic downturn has once again reignited debate over the risks of its heavily leveraged Bitcoin-focused approach.

MicroStrategy’s stock plunges

Remarking on the same, Kobeissi Letter, took to X (formerly Twitter) and highlighted, 

“MicroStrategy stock, MSTR, just fell a MASSIVE -35% from its peak seen on November 21st. That’s ~$30 BILLION of market cap erased in 4 trading days.”

This coincided with BTC once nearing the $100K mark is now trading at $93,418.96 as per CoinMarketCap. 

Adding further on the matter, Kobeissi Letter added,

Despite a brief recovery, MSTR’s stock has continued to feel the impact of Bitcoin’s ongoing correction.

As of the 27th of November, the stock price dropped 7.5% over 24 hours, trading at $354.10, per TradingView data.

Interestingly, retail investors have shown unprecedented interest in MSTR shares.

MSTR stock post-Trump victory

According to The Kobeissi Letter, last week saw retail investors buying $42 million worth of shares in a single day—a record-breaking figure eight times October’s daily average.

For those unaware, over the past week, retail investors have collectively funneled $100 million into MicroStrategy, underscoring growing confidence amidst market volatility.

Additionally, November witnessed a notable strengthening in the correlation between MSTR and Bitcoin, particularly following Donald Trump’s election victory.

However, despite a sharp 35% correction in MicroStrategy’s stock, both assets maintained impressive monthly gains, each up by 37%.

Therefore, over a broader timeframe, their performance remains robust.

How is Bitcoin and MicroStrategy related?

In the past month, Bitcoin surged 44%, while MicroStrategy posted a 32% rally.

On a yearly scale, BTC’s growth reached 146%, while MSTR outpaced it with a staggering 599% increase, highlighting its leveraged exposure to the cryptocurrency’s bullish trajectory.

The price movements of MicroStrategy and other crypto-related stocks remain heavily tied to Bitcoin’s performance, as these entities either hold the asset or generate revenue through trading activity.

Following Trump’s U.S. election victory, BTC’s rally gained momentum, though it faltered just shy of the $100,000 mark, attributed to a high volume of put options below this level.

As expected, the recent price downturn has reignited criticism from skeptics, including Peter Schiff, who seized the opportunity to highlight perceived vulnerabilities in Bitcoin and MicroStrategy’s reliance on it.

Schiff wrote, 

“It’s now been four weeks since the company announced its three-year plan to spend $42 billion buying Bitcoin. MSTR has already spent $10 billion. At this rate, the three-year plan will be completed in about 16 weeks. Once the buying is done, expect both Bitcoin and MSTR to crash”.