I spent last weekend shovelling snow, but I’m back today to ask a simple question: what’s up, or not, with Bitcoin and Microstrategy?
The 5-year chart of Bitcoin shows that the uptrend line joining the two prior highs in 2021 and 2022 are providing significant resistance.
A closer view, back to the beginning of December 2024, shows the post-Trump bounce, and then a 3-month period of consolidation:
The price today, February 22, 2025, is exactly the same as the Bitcoin price on November 20, 2024. Three flat months.
Since the all-time high on January 19, 2025, Bitcoin is down 12%. You can interpret this chart in many ways:
- Bitcoin is in a down channel that started at an all-time high. It’s bounced slightly above and below the channel, but it’s still in it.
- Bitcoin is in a sideways trading range between $92,000 and $99,639, with a few false breakouts.
My bias at the moment is that Bitcoin, at best, is in a trading range. Support at $92,000 is very strong: Nine times since November $92,000 has offered significant resistance and then support:
So, the prudent approach is to watch and wait. If Bitcoin decisively breaks $92,000 and remains below that level for more than a few days, the chances of a drop to the next level of support ($73,000) grow substantially.
A bounce above $108,000 for a sustained period would significantly increase the chances of a run to $125,000 or much higher since, at that point, all overhead resistance is eliminated.
The positive spin on this is that the longer the consolidation, the higher and longer the bounce. The more you compress the spring, the higher the bounce.
The negative spin is that once the floor breaks, you fall to the basement.
I have no opinion on what happens next.
I don’t trade Bitcoin, so it doesn’t matter. What does matter is my position in MSTR—Microstrategy Inc. The good news is that the stock is in an over 1-year upchannel:
The shorter-term picture is somewhat murkier.
After the Trump election (the circle in the above chart), MSTR spiked. It opened at around $293 on Monday, November 11. That same level was support at the end of the year (around December 31). Microstrategy has not retested that level, but as you can see, it’s getting close.
So, as with Bitcoin, we are at an inflection point, a fork in the road. If $293 is support, it’s a great buying opportunity. If MSTR closes below $293 for more than a day or two, the next support level is around $183, which happens to be the conversion price on some of the convertible debt issued in 2024. Interesting.
My strategy is simple:
I have a core holding of shares, that I’ve held for over a year. I’m sitting on gains of around 150%. I’m holding.
But, to “juice” my returns, I’ve been selling covered calls.
On February 14, I sold the $360 strike price calls, expiring on February 28, for $10. As of Friday, they were trading at 86 cents. My plan is to buy them back on Monday for a very nice profit. A few days later, I sold the $350 calls, same expiry date, for $7.5. They are trading at $3, so I will likely take my profit on those as well on Monday.
But then what?
Do I cover again?
Perhaps.
But if MSTR bounces around the $293 level and holds, I will take that as a bullish indicator. I will likely gamble a small amount of money on out-of-the-money calls. I’ll be buying, not selling.
We shall see how it goes on Monday.
My thesis is that, long-term, Bitcoin is going up, so I want to be an owner. The down periods are buying opportunities.
On November 20 MSTR was $540. How risky is it to buy it at $300? A lot less risky than buying it at $540, so I will likely take the gamble.
Thanks for reading, check back next week to see how it went.
Bitcoin and Microstrategy: Consolidation or Imminent Correction?
by JDH on February 22, 2025
I spent last weekend shovelling snow, but I’m back today to ask a simple question: what’s up, or not, with Bitcoin and Microstrategy?
The 5-year chart of Bitcoin shows that the uptrend line joining the two prior highs in 2021 and 2022 are providing significant resistance.
A closer view, back to the beginning of December 2024, shows the post-Trump bounce, and then a 3-month period of consolidation:
The price today, February 22, 2025, is exactly the same as the Bitcoin price on November 20, 2024. Three flat months.
Since the all-time high on January 19, 2025, Bitcoin is down 12%. You can interpret this chart in many ways:
My bias at the moment is that Bitcoin, at best, is in a trading range. Support at $92,000 is very strong: Nine times since November $92,000 has offered significant resistance and then support:
So, the prudent approach is to watch and wait. If Bitcoin decisively breaks $92,000 and remains below that level for more than a few days, the chances of a drop to the next level of support ($73,000) grow substantially.
A bounce above $108,000 for a sustained period would significantly increase the chances of a run to $125,000 or much higher since, at that point, all overhead resistance is eliminated.
The positive spin on this is that the longer the consolidation, the higher and longer the bounce. The more you compress the spring, the higher the bounce.
The negative spin is that once the floor breaks, you fall to the basement.
I have no opinion on what happens next.
I don’t trade Bitcoin, so it doesn’t matter. What does matter is my position in MSTR—Microstrategy Inc. The good news is that the stock is in an over 1-year upchannel:
The shorter-term picture is somewhat murkier.
After the Trump election (the circle in the above chart), MSTR spiked. It opened at around $293 on Monday, November 11. That same level was support at the end of the year (around December 31). Microstrategy has not retested that level, but as you can see, it’s getting close.
So, as with Bitcoin, we are at an inflection point, a fork in the road. If $293 is support, it’s a great buying opportunity. If MSTR closes below $293 for more than a day or two, the next support level is around $183, which happens to be the conversion price on some of the convertible debt issued in 2024. Interesting.
My strategy is simple:
I have a core holding of shares, that I’ve held for over a year. I’m sitting on gains of around 150%. I’m holding.
But, to “juice” my returns, I’ve been selling covered calls.
On February 14, I sold the $360 strike price calls, expiring on February 28, for $10. As of Friday, they were trading at 86 cents. My plan is to buy them back on Monday for a very nice profit. A few days later, I sold the $350 calls, same expiry date, for $7.5. They are trading at $3, so I will likely take my profit on those as well on Monday.
But then what?
Do I cover again?
Perhaps.
But if MSTR bounces around the $293 level and holds, I will take that as a bullish indicator. I will likely gamble a small amount of money on out-of-the-money calls. I’ll be buying, not selling.
We shall see how it goes on Monday.
My thesis is that, long-term, Bitcoin is going up, so I want to be an owner. The down periods are buying opportunities.
On November 20 MSTR was $540. How risky is it to buy it at $300? A lot less risky than buying it at $540, so I will likely take the gamble.
Thanks for reading, check back next week to see how it went.