Top Reasons Why MSTR Stock Price Will Ultimately Bounce Back

Key Insights

• MSTR stock crashed as Bitcoin moved below the key support at $70,000.
• The value of MicroStrategy’s Bitcoin holdings has dropped to $40 billion.
• Strategy stock and Bitcoin have become highly oversold

The MSTR stock price continued its strong downward trend on Thursday as Bitcoin slipped below the key support level at $70,000. Strategy has dropped by over 70% from its all-time high as investors remain concerned about the crypto industry.

Still, there are several reasons why the Strategy stock price will ultimately bounce back in the coming months.

MSTR Stock Price Will Rebound Because Bitcoin Always Emerges From Bear Markets

One of the main reasons why the MSTR stock price has crashed this year is that Bitcoin has continued to move from bad to worse. After peaking at $226,200 in October last year, it continued dropping this week and moved below the key support level at $70,000.

Strategy is directly affected by Bitcoin’s plunge because it is the biggest holder. Data shows that it holds 713,502 coins now valued at $49 billion. At their peak, these coins would be worth over $90 billion.

A closer look at Bitcoin’s chart shows that it always emerges from bear markets. For example, it dropped by over 70% from its 2021 high to its 2022 low, then bounced back to a record high.

Bitcoin also dropped by 33% from its March 2024 high to its August 2024 low, then rebounded. It also fell to below $4,000 as the COVID pandemic started.

In all these periods, especially after the FTX and Terra collapses, it all felt as if the end had come for the crypto industry.

At the same time, the weekly chart below shows that Bitcoin has moved into oversold territory, with the Relative Strength Index (RSI) falling to 28. The last time that Bitcoin got oversold on the weekly chart was in July 2022 and the coin rebounded after that.

Crypto Fear and Greed Index Has Moved to Extreme Fear Zone

The other major reason Bitcoin and Strategy will eventually bounce back is that the Crypto Fear and Greed Index has slumped to the extreme fear zone of 11.

History shows that Bitcoin always rebounds whenever the index moves to the extreme fear zone. A good example of this is what happened recently when it moved to 10 in December. Bitcoin rebounded and moved to over $99,000 after that.

Another example is when the Fear and Greed Index fell to the extreme fear zone in April last year when Donald Trump announced his reciprocal tariffs. Bitcoin dropped to $74,000 at the time, and then bounced back to a new record high in May.

The ongoing Fear and Greed Index crash is notable because it has now formed a double bottom, a common bullish reversal pattern.  That is a sign the index will rebound, boosting crypto prices.

MicroStrategy Has Become a Bargain

Fundamentally, Strategy has become a bargain, especially when one applies the sum of parts valuation strategy. The sum-of-parts approach is a method in which a company is separated into distinct segments and valued independently.

In MicroStrategy’s case, the company has a market capitalization of $40 billion and its Bitcoin holdings of over $50 billion. As such, in an acquisition, one can pay $40 billion to the company, sell the Bitcoin holdings, and retain $10 billion in cash.

MSTR Stock Price Has Become Highly Oversold

Technicals also suggest that MSTR stock is highly oversold, which may attract bargain hunters. The Relative Strength Index has dropped to the oversold level of 25, while two lines of the Stochastic Oscillator have reached their lowest levels since the pandemic.

It is common for investors to buy the dip whenever an asset becomes highly oversold. Also, MicroStrategy has a high short interest, which may trigger a short squeeze.

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