Strategy (MSTR) shares retreated more than 5% on Friday as their recent momentum faded, falling to $136, roughly 20% below the September high and the lowest level since September 18. According to the analysis, the pullback may continue as Bitcoin loses traction and dilution concerns gain steam. The slide highlights how tightly the stock is coupled to Bitcoin itself: with an 848,250-coin treasury, Strategy is among the most direct public-market proxies for the cryptocurrency, which is why cooling crypto demand tends to be reflected in its share price.

Bitcoin momentum cools in ETF and futures markets

MSTR stock declined as the recent Bitcoin rally lost traction. After peaking at $87,270 in September, Bitcoin dropped to $80,980 as demand in the futures and exchange-traded fund (ETF) markets waned.

Spot Bitcoin ETFs — funds that hold Bitcoin directly and have made daily flow data one of the most closely watched gauges of institutional demand since their January 2024 debut — have recorded more than $534 million in outflows this month. That is a sharp reversal from the $2.6 billion in inflows they attracted in September and the $3.52 billion they added in August. In total, these funds have taken in cumulative inflows of $56.9 billion, with BlackRock's IBIT holding $66 billion in assets. Sustained outflows matter for the broader market because they shrink a key source of buying pressure, and in this case they have coincided with Bitcoin's retreat from its September peak.

Bitcoin's futures open interest — the total value of outstanding derivative contracts — has also slipped modestly in recent days, falling to $52 billion from last month's high of $62 billion. Declining open interest is a sign that demand among speculative investors is fading. Meanwhile, the Coinbase Bitcoin Premium Index, a measure of the price gap between Coinbase and global exchanges that is often used to read U.S. investor demand, has remained in the red since September 26.

Strategy's Bitcoin holdings and dilution concerns

Strategy is usually affected by Bitcoin's price action because of its vast holdings. The company holds 848,250 coins, currently valued at $68.6 billion — a treasury large enough that swings in Bitcoin's price flow directly into the value of the company's assets.

For investors, there are signs that the company will continue to dilute shareholders, since it uses its stock to buy Bitcoin. Its outstanding shares have jumped to 352 million from 93.2 million in 2022. Each new issuance spreads the same Bitcoin treasury across a larger share base, which is why the pace of future purchases — and the share sales that fund them — remains a recurring focal point for anyone tracking the stock.

Bitcoin technicals point to further downside risk

Bitcoin has moved lower in recent weeks, sliding from $87,270 in late September to $80,890. The chart has formed a double-top pattern with a neckline at $82,300, a formation that often precedes a strong bearish breakout.

The coin has moved below the important support level of $82,233, its highest level on May 10 this year. It has also slipped under the 50-day moving average, a widely watched trend gauge, while the Relative Strength Index (RSI), a momentum indicator, has continued falling.

These technicals suggest the coin may drop further, toward support at $74,933, its lowest level in September. Such a move would bring the value of Strategy's holdings to $63.4 billion. For MSTR watchers, that linkage is the key thing to monitor: whether Bitcoin can reclaim the broken $82,300 area or extends toward the September low will feed directly into the mark-to-market value of Strategy's treasury.

Chart source: TradingView

MSTR chart shows bearish signals, but analysts stay bullish

The daily chart shows that Strategy peaked at $171.40 on September 22 and is currently trading near $134, a retreat that has coincided with the ongoing Bitcoin sell-off.

The stock has already dropped below the 25-day moving average and a descending trendline that links the highest points of May, September, and October. The two lines of the MACD indicator have made a bearish crossover and are pointing downward. As a result, the analysis suggests the stock will likely continue falling, potentially to the psychological level of $100.

The bearish outlook would be invalidated if Strategy jumps above the resistance level of $150. A move above that level would point further gains, potentially to $200.

Chart source: TradingView

Despite the near-term weakness, analysts have maintained a bullish outlook for MSTR. Cantor Fitzgerald has set a price target of $208, while Citigroup's target stands at $240. Bernstein believes the stock will jump to $350, and B. Riley sees it rising to $195. Those targets, set well above the current share price, reflect each firm's own analysis and will be tested against the same variables now weighing on the stock: the direction of ETF flows, Bitcoin's key chart levels, and the pace of Strategy's share issuance.

Source: CryptoNewsNet