MicroStrategy (MSTR) has faced a dramatic turn of events, dropping nearly 40% from its all-time high of just over $540 per share set on November 21. Despite being up an impressive 416% year-to-date, retail investors who piled in during a peak buying frenzy are now facing significant losses.
Key Developments:
- Year-to-Date Surge: MicroStrategy, a prominent Bitcoin (BTC) development company, had surged as much as 600% this year before the recent drop.
- Retail Buying Spike: On November 20, retail investors made the largest daily purchase in the company’s history, buying approximately $42 million worth of stock. In total, nearly $100 million in retail investments poured into MSTR shares last week.
- NAV Premium Decline: As MSTR’s stock price fell, its net asset value (NAV) premium dropped to 2.09 which is the lowest level since September.
Market Dynamics and Citron Short Report
The sharp decline was triggered by a short report from Citron Research on November 21, coinciding with a broader market correction. Bitcoin, which MSTR closely tracks due to its substantial BTC holdings, also fell by 10% from its peak near $100,000 to around $90,000.
MicroStrategy’s market cap currently stands at $75 billion, while its 386,700 BTC holdings are valued at about $36 billion. This valuation disparity contributes to the NAV premium calculation, which fell sharply due to the price correction.
Record-Breaking Trading Volume
The trading volume for MSTR last week reached a staggering $136 billion. Eric Balchunas, Senior Bloomberg Analyst, highlighted the magnitude of this activity:
“Even the most intense week of GameStop mania couldn’t come close to the week MicroStrategy just had… I also compared it to Amazon, which has never seen a week like this either.”
Expert Insights
The Kobeissi Letter, a leading commentary on global markets, emphasized the retail buying surge:
“Retail investors bought up to $42 million worth of MicroStrategy stock on a single day. Eight times higher than October’s daily average.”
Conclusion
While MicroStrategy’s stock remains a significant player in the crypto-driven market, the recent correction highlights the volatility and risks faced by retail investors. The massive retail buying spree and subsequent sell-off underscore the impact of market sentiment and institutional reports on trading dynamics.