Analyst: MicroStrategy Stock Diverges Technically After Record Highs in BTC, May Suggest Virtuous Cycle Has Been Broken

Analysts are reportedly explaining MicroStrategy's (MSTR) recent share price movement through the Soros Theory of Reflexivity. The theory suggests that there is a two-way interaction between investor expectations and price: investor optimism drives up share prices, which in turn allows companies to raise capital at lower costs, improve performance and then push share prices up further, creating a virtuous cycle. However, when this cycle is broken, price adjustments can exceed market expectations.

MicroStrategy (MSTR) shares continued to fall after inclusion in the Nasdaq 100, at one point dropping to the $300 mark, down nearly 45% from its all-time high of $543 at the end of November, and down about 30% from $430 after the Dec. 14 Nasdaq 100 inclusion announcement. Analysts have pointed to a number of market signals suggesting that MSTR may have formed a short-term top, including the company's stock price soaring nearly eight-fold in a year, founder Michael Saylor's frequent appearances and promotion of a new “Bitcoin Yield” metric, and a number of companies beginning to follow its Bitcoin Reserve strategy.

Despite the recent pullback, MSTR's long-term performance remains impressive. The stock is still up more than 400% year-to-date, and has risen 20 times since August 2020, when it began implementing its Bitcoin Reserve strategy. Most analysts believe that MSTR has experienced several pullbacks of similar magnitude over the past three years, all of which have ended in gains.