MicroStrategy and Bitcoin in freefall: how far can it go?

MicroStrategy down 83%: is it dragging Bitcoin into the abyss?

MicroStrategy, the company that made Bitcoin its primary store of value, has watched its shares fall from $530 to barely $88. The 77% drop in a year is not a technical correction: it is a systemic collapse that opens the door to an uncomfortable question: can it go to zero? And if it does, what would happen to Bitcoin, which is already hovering around $58,000?

The inflation-hedge thesis is crumbling. In May, US inflation stood at 4.1%, its highest level in three years, and Bitcoin fell alongside gold and silver. The hedge doesn't hedge. As Buffett and Munger already warned, if Bitcoin were a real asset, they would accept all the bitcoins in the world for $25. The rhetoric of digital scarcity collides with the reality of financial markets.

Skeptics see MSTR as reckless leverage: the company borrowed to buy Bitcoin. If the crypto asset's price keeps falling, the company's intrinsic value turns negative —you would have to be paid to own it—. Reaching zero is not out of the question, although it is not necessary for the market to conclude that Bitcoin is worth zero. The mere perception that the largest corporate holder of Bitcoin could go bankrupt is enough to sink confidence.

The debate goes beyond the numbers. Some point to the resemblance of certain crypto gurus to old-time snake oil salesmen, and to the irony that those who mocked traditional value investors are now silent. But beyond the mockery, the cold fact is that MSTR has lost its stock market shield, and Bitcoin could lose its own.

With the inflation rally and rate hikes, cheap money is coming to an end. And without liquidity, bubbles burst. The question that remains: what is an asset really worth that generates no cash flow, whose biggest corporate backer is in freefall, and that failed to deliver what it promised?