At the time of this writing, MicroStrategy’s stock is priced at 300.01 USD based on data from NASDAQ: MSTR. This figure represents a 45% downturn from its November high, when it peaked at around $543.

So how did MicroStrategy go from being the most talked-about Bitcoin trade in 2024 to investors issuing warnings about its shares? 

The Bitcoin Therapist shared a hilarious video on X to showcase how MicroStrategy has been doing lately. 

Before we get into why MicroStrategy is dipping, it’s important we look into the asset itself and how it performed in 2024 for context. 

MicroStrategy prides itself on being a Bitcoin treasury company based in Tysons, Virginia. During 2024, this company made significant investments in Bitcoin last year, acquiring billions of dollars' worth of the crypto through a combination of equity and debt financing. 

This approach is what MicroStrategy has been using to strengthen their balance sheet since 2020 and establish it as the largest corporate holder of Bitcoin. However, it has recently come under fire on Wall Street, with investors labelling it as a potentially risky leveraged bet on Bitcoin. 

The backstory to the scrutiny MicroStrategy got started when the company issued $7.3 billion in convertible notes—debt that can later be converted into shares. While this allowed it to acquire more Bitcoin than it otherwise could have, it resulted in a market capitalization of $73.2 billion, which surpassed the value of its Bitcoin holdings.

At that time, investors were willing to pay a premium for exposure to Bitcoin through MicroStrategy’s stock, which currently trades at 1.6 times the value of its Bitcoin assets, according to MSTR Tracker. Even better, MSTR was considered a viable investment when this premium reached 3.4 times in November.

During this period, MicroStrategy’s share price surged by 334%, significantly outpacing Bitcoin's increase of 116%. Bernstein analysts noted that MicroStrategy is "building a case" for this premium due to its demonstrated ability to grow its Bitcoin holdings per share.

However, with an implied price of $200,000 per Bitcoin for MicroStrategy shares, it seems that "stock investors are no longer willing to support MicroStrategy with an inflated" stock price relative to its Bitcoin assets, according to a report from 10X Research. 

They added that this shift reflects a growing rationality among investors who previously embraced the notion of MicroStrategy as merely "a leveraged Bitcoin play."

While leveraged investment products do exist and allow traders to gain more market exposure to an asset or benchmark, some analysts have raised concerns about MicroStrategy. 

Popular investment guru Michael Lebowitz, CFA, wrote a post on X saying, “MicroStrategy $mstr is preying on investors. They are pumping up optimism on Bitcoin to drive higher volatility in their stock. Doing so allows them to raise funds and add to their Bitcoin holdings.” 

“Its convertible funding strategy is legal, but the risks to its shareholders and bondholders are much more significant than many of its investors appreciate,” he added. 

Despite concerns surrounding MicroStrategy’s premium valuation, the firm was added to the Nasdaq-100 index last month, marking a significant achievement within the stock market index that tracks leading tech companies. For this, some analysts still believe this inclusion could attract billions of dollars into MicroStrategy's stock.

The addition was celebrated by Bitcoin enthusiasts; shortly after, the asset's price peaked at $108,000. However, since then, Bitcoin's value has dropped by 10%, while MicroStrategy's stock has seen an even steeper decline.

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