MSTR Stock Dips After Selling Bitcoin to Fund Digital Credit Dividends

Key Insights

• MSTR stock price dived after the company sold 3,588 Bitcoin.
• The company is selling BTC to fund its digital credit dividends.
• This happened after its top preferred stocks crashed below par.

MSTR stock retreated by over 5% on Monday after the company announced the latest corporate actions to boost its balance sheet. Strategy fell to $95, down sharply from its all-time high of $544, erasing billions of dollars in value.

MSTR Stock Drops After Bitcoin Sales

The biggest Bitcoin buyer in the world has now become a top seller as the crypto winter intensifies. In a statement on Monday, the company said that it sold 3,588 coins for $216 million last week. This sale brought its cash reserves to $2.5 billion.

Strategy sells Bitcoin | Source: X

The company has more room to sell Bitcoin in the coming weeks or months. In a recent statement, it said its goal was to sell coins worth over $1 billion, a move intended to boost cash on its balance sheet. This is a major change for a company that has vowed not to sell its coins for years.

Strategy is selling its coins at a loss, considering that its average purchase price was $75,480. This is happening as the company faces one of the most challenging periods in its history.

The crisis began after the company issued several preferred stocks to help fund its Bitcoin purchases. It raised millions of dollars by launching these assets. As such, it hoped that Bitcoin would continue to rise, making it easier to fund its future dividends. The opposite happened: Bitcoin’s price crashed, bringing its basic mNAV below 1.

This crisis escalated a few weeks ago after the company’s preferred stocks moved below par. STRC, its popular preferred stock dropped to $72, while STRK fell to $50. This retreat is primarily because Bitcoin, Strategy’s main asset, does not generate cash returns, and its software business does not make much money.

Strategy’s Bitcoin Sales May Lead to a Steeper Downside

The ongoing Strategy’s Bitcoin sales put BTC at risk as we saw in June. Bitcoin price plunged below the key support level of $60,000 for the first time in years after Strategy sold 32 coins. As such, given that the coin sold over 3,800 last week, there is a risk it may continue to fall.

Worse, this is happening at a time when American investors are selling Bitcoin aggressively. Data shows spot Bitcoin ETFs shed over $4.5 billion in assets last month. These funds have now shed over $6 billion in assets this year. This could be a sign that investors are falling out of love with Bitcoin, possibly as they move to other booming sectors like semiconductors and memory.

Another sign that demand is waning is that the Coinbase Bitcoin Premium Index retreats. It has remained in the red for months, a sign that American investors are no longer buying as they did before.

Worse, Strategy’s decision to sell Bitcoin may prompt more companies to sell their own coins. Bitcoin treasury companies hold over 1.264 million coins worth over $77.59 billion.

Strategy Stock Price Technical Analysis

The daily chart shows that the Strategy share price has slipped in the past few months and reached a multi-year low of $82.26. Technicals point to further downside after it formed an inverted cup-and-handle pattern, a common continuation sign. It recently retested the key resistance level at $104.5, the lower side of the cup. This is known as a break-and-retest pattern.

MSTR stock chart | Source: TradingView

The stock has remained below all moving averages. At the same time, the Relative Strength Index (RSI) has formed a descending trendline. Also, the MACD has continued falling.

Therefore, the stock will likely continue falling, potentially to the key support level of $70. This bearish outlook will be invalidated if it moves above $125.

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