Why Microstrategy Stock Is Plummeting Today

MicroStrategy (NASDAQ: MSTR) stock saw big sell-offs in Tuesday's trading. As of 3:15 p.m. ET, the company's share price was down 11% amid a 1.1% pullback for the S&P 500 index and a 1.9% decline for the Nasdaq Composite index. Meanwhile, the price of Bitcoin (CRYPTO: BTC) was down 5% over the past 24 hours.

With its heavy investments in the market-leading cryptocurrency, MicroStrategy has effectively turned itself into a bet on Bitcoin. With the token losing ground today and the broader stock market facing some intense selling pressures, the company's share price is tumbling.

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MicroStrategy stock weakens on Bitcoin pullback

Bitcoin enjoyed a strong rally in yesterday's trading, but it's giving up those gains today as investors teeter back to being more risk-averse. The pullback for Bitcoin is even more impactful for MicroStrategy because the company just disclosed on Monday that it had bought an additional $101 million worth of Bitcoin across the final two days of 2024.

Sell-offs for Bitcoin today corresponded with the latest round of economic data from the U.S. Bureau of Labor Statistics. The report showed that job openings had risen to 8.1 million in November -- ahead of the 7.7 million openings called for by the average analyst estimate and up from 7.8 million in October.

Investors are interpreting the data as a sign that the economy may still be running hotter than expected, which could cause interest rates to remain higher for longer and create a less favorable backdrop for cryptocurrencies and other speculative assets. Yields on U.S. Treasury bonds also moved higher, which typically corresponds with bearish pressures for stocks.

What comes next for MicroStrategy?

MicroStrategy's future is essentially hitched to Bitcoin. If the cryptocurrency performs well, the company's shareholders are likely in for some strong stock performance. Alternatively, a sustained pullback for Bitcoin will almost certainly result in big sell-offs for MicroStrategy shares.

For investors bullish on Bitcoin, investing in MicroStrategy could be another way to play the possibility of an ongoing bull rally for the market-leading crypto. On the other hand, investing in the company comes with some additional risks -- and investing directly in Bitcoin comes with many of the same upside scenarios and fewer potential pitfalls.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.