MicroStrategy (MSTR) Stock Pump and Dump, Are Retail Investors Trapped?

MicroStrategy stock has come under strong selling pressure collapsing another 12% on Tuesday, while ending the trading at $353 levels. MicroStrategy (NASDAQ: MSTR) has already corrected by 35% in just the past five from its peak on November 21. The recent drop in Bitcoin price to $92,000 puts further selling pressure on MSTR, in what appears to be a classic case of pump and dump for retail investors.

MicroStrategy Stock Drops Along With Bitcoin

While the Bitcoin price corrected 9-10% in the last four days, the MicroStrategy stock corrected by a staggering 35%, which is four times that of Bitcoin’s fall. This erased a staggering $30 billion from the company’s market cap in just four trading sessions.

MSTR, which is popular as a leveraged Bitcoin play or a Bitcoin proxy, is currently facing massive volatility. Unfortunately, it turns out that retail investors got trapped in this market frenzy.

Last Wednesday, retail investors purchased approximately $42 million worth of MSTR shares, marking the largest single-day buy in the company’s history, according to The Kobeissi Letter. This surge in activity was eight times higher than the daily average recorded in October. Over the last week, retail investors poured a staggering $100 million into MSTR.

During the month of November, especially after Donald Trump’s victory, the correlation between MSTR and Bitcoin widened further. However, following the 35% correction in the stock, both MSTR and Bitcoin are trading 37% up on the monthly chart.

As a result of this recent correction, Microstrategy has witnessed a notable shift in its value multiplier, dropping from 3.34x to 2.36x in just five days. It is the combined impact of Bitcoin’s recent price dip and an even steeper decline in MSTR stock price. At the current market cap of $73.1 billion, MSTR is still trading at 2.1x their Bitcoin holdings.

On the other hand, founder Michael Saylor has continued to bolster the company’s Bitcoin holdings, increasing its BTC reserves by approximately 16% over the past week. MicroStrategy recently purchased 55,500 Bitcoinsfor a staggering investment value of $5.4 billion taking its total Bitcoin holdings to 386,700 BTC.

Where Is MSTR Heading Next?

With a massive 35% fall from its peak, the question on every investor’s mind is where is MSTR price heading next. During Tuesday’s trading session, the MSTR stock tested its 20-day Exponential Moving Average (EMA) at the session lows and successfully held the level, while signaling a potential support there.

Analyst Traderstewie anticipates a rebound, with tomorrow’s session likely to trigger a bounce or reversal phase. the analyst noted that if the MSTR stock opens with an upward gap, traders should watch for a quick gap fill before a potential reversal that could lead to a significant recovery. On the other hand, some analysts believe that Marathon Digital (MARA) stock would be a better bet than MSTR.

The recent price crash has given MicroStrategy and Bitcoin critics like Peter Schiff a chance to stress their criticism. Schiff wrote: “It’s now been four weeks since the company announced its three-year plan to spend $42 billion buying Bitcoin. MSTR has already spent $10 billion. At this rate, the three-year plan will be completed in about 16 weeks. Once the buying is done, expect both Bitcoin and MSTR to crash”.