Top risks facing MSTR stock as Strategy buys 10,625 Bitcoins

The MSTR stock price remains in a technical bear market on Monday, even as the company spends $980 million on 10,645 Bitcoin.

Summary

• The MSTR stock price is facing multiple technical and fundamental headwinds this year.
• It has formed a bearish flag pattern, pointing to more downside in the near term.
• The stock may drop after the upcoming Bank of Japan interest rate decision.

Strategy, formerly known as MicroStrategy, was trading at $176.45, down by ~62% from its highest point this year. This decline has coincided with the ongoing weakness in Bitcoin (BTC), as it dropped from $126,300 in October to $90,000 today. 

In a statement, Michael Saylor said that the company acquired 10,645 coins valued at $980.3 million last week. This accumulation brought its total holdings to 671,268 coins, currently valued at over $60 billion. Still, MSTR stock price faces major risks that may push it lower in the near term.

MSTR stock is facing technical risks

The daily chart shows that the MSTR stock price has crashed this year, moving from a high of $457 in July to the current $176. A closer look reveals that it has formed a bearish flag pattern, consisting of a flagpole-like line and an ascending channel. It is now in the flag section of this pattern. 

Strategy stock has also formed a death cross pattern, and it remains below the important support level at $230, its lowest point in February and April this year. It is also below the Supertrend indicator.

Therefore, the most likely MSTR stock price forecast is bearish, with the next key support being the year-to-date low of $155. A drop below that level will indicate further downside to $100.

Bitcoin price is at risk of falling to $75,000

The BTC price is also at a significant risk of further downside in the near term. The daily chart indicates that it has formed a rising wedge pattern, a bearish flag pattern.

Bitcoin has also remained below all moving averages and the key resistance level at $94,635. It has also fallen below the Ichimoku cloud. 

Therefore, the coin may drop further to last month’s low of $80,600. A drop below that price will point to more downside to the April low of $75,000.

BoJ interest rate hike

The other key risk that MSTR stock faces is the upcoming Bank of Japan interest rate decision on Friday. Kazuo Ueda, the central bank governor, has already telegraphed that it will hike rates to combat inflation, which has remained above 3%.

Polymarket data indicate that the probability of a rate hike has increased to 98%. This is important because it will occur as the Federal Reserve slashes interest rates.

Historically, a divergence between the Federal Reserve and the BoJ has led to greater downside because of the unwinding of the carry trade, which has persisted for many years.

Bitcoin also faces other risks, including ongoing deleveraging, as evidenced by falling futures open interest and a flattening funding curve. Therefore, further Bitcoin weakness will likely lead to a sell-off in Strategy stock over time.