Here’s Why the STRC, STRD Crash is Hurting the MSTR Stock

Key Insights

• The MSTR stock price has continued its strong crash this week.
• Top preferred shares like STRC and STRD have continued their strong downward trend.
• Technical analysis suggests that the stock will continue falling in the near term.

MSTR stock price continued its strong downward trend today, reaching its lowest level since February 2024. This trend may continue in the foreseeable future as top preferred stocks like STRC, STRD, STRK, and STRF continue falling.

STRD and STRC Stocks are in a Freefall

Strategy stock continued falling today, as concerns about its preferred shares continued rising. The Variable Rate Series A Perpetual Stretch Preferred Stock (STRC) plunged to a low of $73.56 today. That’s much lower than its par level of $100.

This indicates that it has lost its peg. The situation is getting worse, even after the CEO announced that he was buying shares worth $1 million.

STRC is not the only one falling. The 10% Strategy A Perpetual Stride Preferred Stock (STRD) dropped to $52 from the year-to-date high of $80. Furthermore, the 8% Series A Perpetual Strike Preferred Stock (STRK) has continued falling, reaching a low of $52.50.

These stocks are falling because of the overall Bitcoin weakness and the risk that the company may struggle to pay its dividends. Bitcoin price retreated to $59,000 on Wednesday as spot BTC ETF outflows continued. They have shed over $2.9 billion in assets this month.

Worse, the company does not have enough cash to cover its dividends. It now has about $1.4 billion in cash, much lower than the $1.7 billion annual requirements.

Strategy May Need to Raise Cash Soon

Therefore, the company is likely to need to raise capital to cover its dividends. Strategy has three main ways of raising cash to pay its dividends.

It can use the funds from its software business to make these payments. The challenge, however, is that the business does not generate substantial revenue.

Second, the company can decide to sell more shares to raise the funds. It has been doing this for months. In a report earlier this week, the company said that it boosted its balance sheet with $300 million in cash.

Over the years, Strategy has diluted its shareholders substantially. With this, the outstanding shares jumped to over 326 million from 75 million a few years ago.

Third, and most importantly, the company may decide to sell part of its Bitcoin to boost its cash reserves. The risk of doing this is that it will mean that the Bitcoin sales will be at a loss since the average buying price is $68,000.

The other risk is that selling Bitcoin will lead to a steep decline in the value of BTC and other coins. This was seen earlier this month, when the company sold 32 coins. In the aftermath, Bitcoin price crashed below $60,000 as investors exited their positions.

Therefore, the reality is that Michael Saylor is in a difficult place with no easy way out. One approach would be for the company to stop buying Bitcoin for now. The challenge, however, is that a pause in Bitcoin buying may also push BTC prices lower, affecting its price.

MSTR Stock Price Technical Analysis

The daily timeframe chart shows that the MSTR stock price has been in a strong downward trend in the past few months. This sell-off intensified after the stock dropped below the crucial support level of $103, its lowest level on February 5.

Strategy stock has dropped below all moving averages, while the Average Directional Index (ADX) has jumped to 29.7. That’s its highest point since January, a sign that the trend is strengthening.

Therefore, the most likely MSTR stock forecast is bearish, with the next key target to watch being at $50. If this happens, it will be a 90% decline from its highest point on record.

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