Strategy (MSTR -9.91%) stock is slumping in Tuesday's trading. The company's share price was down 13% as of 2:40 p.m. ET. Meanwhile, the S&P 500 was down 0.6% and the Nasdaq Composite was down 1.3%. The price of Bitcoin was down 7.8% over the previous 24 hours.
The company, which was known as MicroStrategy until recently, is seeing its valuation pull back in response to an increase in bearish sentiment that is shaping trading for stocks and cryptocurrencies. News that the Trump administration plans to move ahead with significant new tariffs on Canada and Mexico and implement new restrictions on semiconductor exports to China is driving substantial valuation pullbacks today. Nvidia's fourth-quarter earnings release and conference call is also scheduled to take place after the market closes tomorrow and could have a substantial impact on equity and crypto valuations.
Strategy has transformed itself into what is effectively a Bitcoin investment company. As such, the stock's performance will tend to see a strong correlation with token-price moves for the market-leading cryptocurrency. Any bull thesis on Strategy stock has to start with a bullish thesis on Bitcoin. With the cryptocurrency now trading down roughly 14% from its high, it's not unreasonable to think that Strategy's share price could surge in conjunction with a valuation rebound for the token.
On the other hand, investors who are bullish on Bitcoin's long-term outlook could be better served by simply investing in the cryptocurrency directly. While Strategy's and Bitcoin's bullish scenarios have a great deal of overlap, investing in the company comes with some additional risk factors. The financing strategies that open the door for the stock to outperform Bitcoin also come with a heightened level of complexity and downside risk. With that in mind, I think investors seeking exposure to the crypto market will be better served by just investing directly in Bitcoin.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.