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Why MicroStrategy’s Shares Fall Today

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What happened

MicroStrategy‘s (NASDAQ: MSTR) The stock took a hit today after the company announced it had bought 13,005 Bitcoin tokens. The announcement came as China’s central bank announced it would start cracking down on cryptocurrencies.

MicroStrategy’s share price was down 10.7%, down 9.7% as of 2:33 p.m. EDT.

So what

Although MicroStrategy is technically a software company, it has essentially tied its fate to Bitcoin after continually buying the cryptocurrency. The company said today that with its latest purchase, it now owns 105,085 Bitcoins with an average purchase price of around $ 26,080 per Bitcoin. A Bitcoin is worth around $ 32,380 today.

Image source: Getty Images.

But the announcement of MicroStrategy’s purchase of Bitcoin appeared to be misplaced after the central bank of China asked the country’s payment processors and banks to limit the risks associated with buying and selling crypto. currencies. In some cases, this could mean preventing cryptocurrency traders from funding their accounts for transactions.

It is estimated that 75% of the world’s Bitcoin has been mined in China, but the Chinese government has become increasingly skeptical of cryptocurrencies due to their unregulated and decentralized nature.

Now what

MicroStrategy’s stock has seen significant declines from its February high, but its stock price is still up over 392% in the past 12 months. Investors should be aware that MicroStrategy’s shares are likely to remain volatile as long as the company is betting its future on Bitcoin.

This doesn’t mean that MicroStrategy’s shares are doomed to fail, but it does mean that long-term investors will likely have to endure big declines as countries around the world try to figure out how cryptocurrencies fit in. their savings.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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