Michael Saylor’s MSTR stock at risk, DAT bubble shows signs of bursting
Strategy Inc. (MSTR) stock price has plunged to its lowest level since April, dropping over 45% from its year-high and 53% from its all-time high, reducing its market cap from $128 billion to $72 billion. This decline highlights issues in the Digital Asset Treasury (DAT) industry, as valuation metrics like market net asset value (mNAV) have significantly decreased. Other treasury firms, including BitMine, Alt Sigma, and Metaplanet, are also experiencing similar challenges. Technical analysis suggests further downside for MSTR stock, as bearish patterns like the death cross and high ADX readings indicate a strengthening downtrend. The stock may drop further to $200 as market sentiment worsens.
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Stock Price Plunge of MSTR
Strategy Inc. (MSTR), the largest digital asset treasury company, has seen its stock price fall to its lowest level since April. The stock has plunged over 45% from its yearly high, hitting $250, and is now down by 53% from its all-time high. This decline has wiped out a significant portion of its market cap, which now stands at $72 billion, down from a record $128 billion.
Digital Asset Treasury Industry Decline
The decline in MSTR stock price reflects the broader troubles in the Digital Asset Treasury (DAT) industry. Companies in this sector have faced eroding valuation metrics. For instance, Strategy's market net asset value (mNAV) multiple has dropped dramatically, falling from 3.5 in November last year to 1.08 today. Meanwhile, enterprise value-based mNAV has plummeted to 1.311 from over 4 in early 2024, signaling an industry-wide adjustment. This trend suggests that MSTR's market cap and mNAV multiples might dip below 1, aligning with other major firms like KindlyMD, Metaplanet, and MicroCloud Hologram.
Evidence of a Bursting DAT Bubble
The ongoing crash in MSTR stock price is seen as evidence that the DAT bubble has burst. Stocks of other companies in the industry, such as Tom Lee's BitMine, have plunged by over 70% from their all-time highs. Moreover, treasury companies such as Alt Sigma, Tron Inc., and The Smarter Web Company have all experienced double-digit percentage drops. Many of these firms now have a NAV multiple below 1, indicating that their Bitcoin holdings are worth more than their valuations. As an example, Japan's Metaplanet holds Bitcoin valued at over $3.2 billion, while its market cap is only $3 billion.
Technical Analysis of MSTR Stock
Technical indicators suggest that the downside risk for MSTR remains significant. A death cross pattern formed on October 22, as the 50-day moving average dropped below the 200-day moving average, a bearish signal for further declines. The Average Directional Index (ADX) has surged to 28, its highest level since May 20, indicating a strengthening downtrend. Additionally, both the Relative Strength Index (RSI) and Stochastic indicators continue to decline. The Supertrend indicator remains above the stock price, hinting at further downside potential, with a psychological support level at $200.