MicroStrategy’s Stock Plunge Deepens as Bitcoin, Miners Slump

(Bloomberg) — Shares of MicroStrategy Inc. fell by the most since 2017 as the company, often used as a proxy for Bitcoin, followed the world’s largest cryptocurrency lower amid a broader selloff in risk assets.

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The enterprise software maker run by Bitcoin evangelist Michael Saylor declined 26% on Monday as the price of Bitcoin hovered near a key threshold of $30,000 and the benchmark S&P 500 declined about 3.2% on concerns tightening monetary policy could throw the economy into a recession.

Other crypto-exposed stocks, including top miners such as Marathon Digital Holdings, also saw sharp declines. Marathon, the largest public miner in the U.S. by market value, dropped 19%, bringing its year-to-date losses to 63%. Meanwhile, Core Scientific Inc. fell 13% to a new low and Riot Blockchain Inc. declined 19% to the lowest since November 2020.

Many crypto-related stocks will move in lockstep with Bitcoin as such companies have large amounts of the mined token on their balance sheets and can be used as a proxy by investors who do not want to directly hold Bitcoin in their portfolios.

“Crypto and equity markets are largely selling off in tandem due to a broad risk-off environment where many investors are moving to cash,” Steven McClurg, chief investment officer of Valkyrie Investments, said. “The correlation between the two asset classes has grown more pronounced in recent months because the number of publicly traded companies involved in blockchain and digital assets continues to grow, and is not likely to reverse course.”

Over the weekend, Bitcoin also fell below a key level of $33,000 after a selloff in growth and technology stocks followed moves by the Federal Reserve to boost interest rates in order to tame decades-high inflation. The tech-heavy Nasdaq 100 is suffering heavy losses, down 26% from a high in November, while the S&P 500 has shed about 15% over the same time period.

“Now that some corporate treasuries are hovering near their cost basis, markets are waiting and watching to see if shareholders will force some de-risking,” Josh Lim, head of derivatives at New York-based brokerage Genesis Global Trading, said.

Backers often champion Bitcoin as store of value similar to gold that’s uncorrelated with other financial markets. However, the digital currency has been among the most hard-hit asset classes by the risk-off environment.

The losses come after shares of miners spiked late last year, along with Bitcoin, after a ban on crypto mining in China enabled the rest of the world to mine tokens with less competition. However, since then, shares have fallen along with Bitcoin and as margins have deteriorated on higher energy prices stemming from sanctions on Russian energy imports.

“In the short term, we believe the markets will continue to sell off through the summer, especially if rate hikes continue through the June and July FOMC meetings, before staging a potential rally through the end of the year in a pattern that has largely established itself over the past decade,” McClurg said. “One thing to watch is the yield curve, as an inversion would be a harbinger of further selloff. Recession is imminent.”

(Updates shares. A previous version corrected to say the price of Bitcoin is near $30,000.)

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