Bitcoin has sustained its upward push despite MicroStrategy, one of its largest institutional holders, collapsing by a concerning margin.
Bitcoin has continued its impressive rise, surpassing $98,000 and edging closer to the much-anticipated $100,000 milestone. This performance comes despite a sharp 16% drop in the stock price of MicroStrategy, a business intelligence firm known for its extensive Bitcoin holdings.
MicroStrategy’s stock (MSTR) has taken center stage in recent times, surging and then collapsing within days. The company, often considered a proxy for Bitcoin due to its massive cryptocurrency investments, saw its stock rise to $543 from $370 over three days. However, it abruptly plummeted to $390.
Activity Behind the MicroStrategy Slump
The recent market moves were closely linked to unusual trading activity in MSTR options markets. According to financial platform Unusual Whales, the company saw record-high net premiums for put options in the last 30 days.
For the uninitiated, put options are essentially financial contracts that allow traders to sell a stock at a particular price. They are typically used when the traders anticipate a decline in the stock’s value.
Traders targeted strike prices of $400 and $350 for puts while selling calls at $500. This combination indicated bearish sentiment, suggesting that investors expected the MSTR stock price to drop further after its rapid rally over the past three days.
As MicroStrategy’s stock surged yesterday, prominent trader DonAlt noted that the situation resembled speculative trading similar to past events in the crypto market. He pointed out that high premiums being paid in options trading seemed excessive and unsustainable.
MSTR is giga ponziing by the way
That chart is insaneThink at this point it's a lot of people trying to capture the premium getting repeatedly blown out
Seems insane to pay these kinda premiums for this, reminds me a little of GBTC pic.twitter.com/gPzTSQtWeR
— DonAlt (@CryptoDonAlt) November 21, 2024
As the stock reached $471 earlier in the day, DonAlt described the scenario as traders chasing short-term gains while repeatedly facing losses. Hours later, his predictions materialized, as the stock nosedived by over 30%, settling at $390.
Interestingly, the price collapse occurred hours after leading research firm Citron Research confirmed it had opened a short position on MicroStrategy. The firm acknowledged that it remained bullish on Bitcoin but noted that the MSTR stock has become overheated.
How did this one age? Nearly 4 years ago to the date, Citron was the first to tell readers that MicroStrategy was the ultimate way to invest in Bitcoin, setting a $700 target.
Fast forward to today: $MSTR has skyrocketed to over $5,000 (adjusted). Kudos to Michael Saylor for…— Citron Research (@CitronResearch) November 21, 2024
Bitcoin Remains Unfazed
Despite the turmoil with MicroStrategy, Bitcoin’s price showed remarkable resilience. Historically, Bitcoin’s price movements and MicroStrategy’s stock price direction have correlated due to the company’s substantial Bitcoin holdings.
However, in this instance, Bitcoin maintained its momentum, recording a 12.48% gain over the past week. Interestingly, amid the sharp drop in MSTR stock price, MicroStrategy Chairman Michael Saylor confirmed yesterday that the firm had raised $3 billion to buy more BTC.
Notably, MicroStrategy stock remains one of the best performers in the market this year. The latest collapse has not impacted its monthly performance, with the stock up by an impressive 62% in November, and a more impressive 473% this year.
DisClamier: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
