Microstrategy Confirms It’s Overextended, MSTR Drops Over 6%

Microstrategy Confirms It's Overextended, MSTR Drops Over 6%

Key Takeaways:

  • Microstrategy stated it might sell some its Bitcoin holdings to cover their debt interest
  • MSTR price fell over 6% on May 2 before recovering

NEW DELHI (CoinChapter.com) — MicroStrategy’s shared its Q1/2023 earnings report on May 1 with $30.59 earnings per share, surprising market estimates by over 6,140%. However, the Michael Saylor-led firm might heading for trouble, with MicroStrategy stating it might not be able to cover its debt interests.

The business intelligence firm recorded over 2% increase YoY in revenue, netting $121.9 million in the Q1 2023. Moreover, the firm recorded a decrease in digital asset impairment losses, with $18.9 million in Q1 2023 compared to $170 million in Q1 2022.

However, despite the positive updates from the firm, the Q1 earning report contained some warning signs. MicroStrategy warned investors that the firm’s indebtness might hamper its Bitcoin acquisition strategy, fund its software operations, or “take advantage of new business opportunities.”

Analysts speculate that MicroStrategy might be headed for trouble
Analysts speculate that MicroStrategy might be headed for trouble

Furthermore, MicroStrategy speculated it might default on its debt, forcing the firm into bankruptcy. CoinChapter had warned that the firm’s strategy to invest heavily in Bitcoin might backfire and put it at risk of bankruptcy.

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. Accordingly, stockholders must rely on capital appreciation, if any, for any return on their investment.

MicroStrategy said in its prospectus

The firm was heavily dependent on Bitcoin’s price action. Now, MicroStrategy plans to sell Bitcoin and its shares to pay its debts. Additionally, the firm warned that it might incur more indebtness in the future.

A sell-off by the firm with the largest BTC holding might harm the cryptocurrency’s price action.

MSTR Price Drops Before Recovering Again

MSTR shares price dropped during trading early in the day on May 2 after the release of its Q1 earnings report. However, bulls recovered later in the day, helping MicroStrategy rise over 5% on May 2.

Also Read: MicroStrategy’s debts start coming due as Bitcoin slides below $21K

MSTR price has had a good quarter so far, rising nearly 139% YTD to form daily high near $332.9. The firm’s share prices rebounded off its 20-day EMA (red wave) support to target resistance near $337.7.

As more buyers enter the market, MSTR price might break above its immediate resistance and rise to $375 before downside corrections pare gains.

MSTR price daily chart with RSI
MSTR price daily chart with RSI. Source: Tradingview.com

However, a sell-off could force the MicroStrategy share price breach below its 20-day EMA resistance and fall to its support near $290. Additionally, breaching the immediate support level might result in MSTR price dropping to test its 200-day EMA (green wave) support near $259 before recovering.

Meanwhile, the relative strength index for MSTR remained neutral, with a value of 57.33 on the daily chart.

Microstrategy, Microstrategy Confirms It’s Overextended, MSTR Drops Over 6%

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