MSTR Stock Alert: Why Is MicroStrategy Down 20% Today?

  • Shares of  Microstrategy (MSTR) stock have plunged today on more crypto contagion.
  • The latest cause for concern is tied to the recent acquisition of FTX (FTT-USD) by Binance (BNB-USD).
  • Most top tokens are down, leading to marked declines for companies with levered exposure to the sector.
MSTR stock - MSTR Stock Alert: Why Is MicroStrategy Down 20% Today?

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One of the most-watched tokens, I mean stocks, investors are watching today is that of Microstrategy (NASDAQ:MSTR). A company synonymous with the crypto sector, this business intelligence firm has seen its fair share of volatility of late. Today, MSTR stock is exhibiting such a volatile profile, sinking more than 23% at the time of writing.

Like most rapid declines in the value of MSTR stock, investors need only look at the price of Bitcoin (BTC-USD) as one of the key catalysts for this move. Bitcoin is currently trading more than 10% lower intra-day, making Microstrategy’s move seem outsized.

That’s typically the case for this company, which holds a significant amount of Bitcoin on its balance sheet. As it happens, Microstrategy has taken a leveraged approach in acquiring more Bitcoin in recent years. In other words, taking out USD-denominated debt to simply hold Bitcoin.

Such a strategy in times like these has proven to be very costly. That said, let’s dive into what’s driving this frenzy out of crypto assets today.

MSTR Stock Sinks Along With Crypto Sector

The price of MSTR stock, Bitcoin, and most crypto-related assets are moving significantly lower on the latest contagion-related headwind for the sector. Following what could be the full-on demise of the world’s second-largest crypto exchange, FTX (FTT-USD), there’s plenty of reason to panic, as not even the most “stable” exchanges appear able to survive the volatility of late.

With respect to FTX’s FTT token, there are specific catalysts that have driven this decline. An ongoing spat between FTX founder Sam Bankman-Fried and Binance (BNB-USD) founder Changpeng Zhao has entertained investors for days. However, this spat turned ugly following CZ’s decision to liquidate the company’s FTT holdings, given concerns around reports this token was apparently the major source of liquidity for Alameda Research, a company closely tied to FTX.

Essentially, a run on FTT tokens ensued, with the token dropping nearly 70% today on the intense selling pressure. This sort of downward spiral forced FTX into a corner, where it appears selling out to Binance is the only solution.

Today, investors appear to be wondering what will happen when the last company standing needs a bailout. Thus far, FTX has been bailing out many of its competitors to keep the sector alive. Thus, there are more existential problems facing the sector today. For MicroStrategy and other crypto-related stocks, that’s not a good thing.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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