Key Points
- MicroStrategy’s stock price hits a six-month high, increasing by over 6%.
- Bitcoin’s price struggles as it trades under pressure since the start of October.
MicroStrategy, the largest corporate holder of Bitcoin, experienced a surge in its stock price, exceeding 6% on Monday and reaching over $190, marking a six-month high. According to 10x Research, the MSTR share price is on the verge of a six-month breakout.
This increase could potentially influence the price of Bitcoin, which has been trading under pressure since October’s commencement. Currently, Bitcoin’s price has fallen by 2%, dropping below $62,500, with bearish trends dominating before the US CPI data release on Thursday.
Implications for Bitcoin
10x Research suggests that a breakout in MicroStrategy’s stock price could be beneficial for Bitcoin, potentially driving its price higher throughout October. Markus Thielen, the founder of 10x Research, stated that if MSTR’s stock price exceeds $180, it could trigger further bullish momentum. However, he also noted that the stock price is already 44% more costly compared to Bitcoin.
Thielen wrote, “Market makers may be forced to hedge their short gamma exposure as they likely sold calls to retail investors), and hedge funds holding $4.6 billion in short positions on MicroStrategy shares could face pressure to cover those shorts if the price surpasses the $180 mark.”
MicroStrategy’s stock rally might encourage the company to accrue more debt to acquire additional Bitcoin, given the consistent demand for the company’s notes and the consistent upsize of each issuance, as stated by Thielen. He also noted, “Raising even more debt to purchase bitcoin seems logical. A breakout in MicroStrategy’s stock could have a ‘tail wags the dog’ effect, where the momentum in its shares positively impacts Bitcoin’s price, creating a feedback loop.”
Bitcoin Price Challenges
Bitcoin’s price faced another rejection at $64,000 this week, declining towards its support levels of $60,000. Socio-political events seem to be the primary factor limiting Bitcoin’s upside, despite the global monetary base (M2) expanding from $104 trillion in June to $108 trillion in October. Bitcoin has faced multiple rejections at the $68,000 resistance level, indicating that the recent rally to $64,000 is unlikely driven by the U.S. fiscal situation.
Several factors have been hindering Bitcoin’s growth. These include the escalating war in the Middle East, global macro uncertainties, and the upcoming US presidential elections in November.
Last week, the released US jobs data reduced the chances of an economic recession. However, it also lessened the likelihood of another 50 bps rate cut in November. Consequently, higher interest rates will likely make investors more risk-averse, resulting in fewer capital inflows into cryptocurrency.
