Bitcoin Loses 70,000 Mark. Crypto Stocks Tumble, Strategy May Test $100 Level.

TradingKey - MicroStrategy and Bitcoin are in a downward spiral; the key to a short-term halt in the decline lies in the upcoming release of U.S. ADP and non-farm payroll data.

During pre-market trading on June 2, Eastern Time, cryptocurrency-related stocks fell collectively, with MicroStrategy ( MSTR) fell over 3%; Circle ( CRCL) and Coinbase ( COIN) fell over 2%; Robinhood ( HOOD ), Block ( XYZ) and MARA Holdings Inc ( MARA) all fell more than 1%.

The catalyst for this sharp decline, beyond the risk-off sentiment triggered by geopolitical tensions between the U.S. and Iran, was MicroStrategy's own actions, which shocked the crypto community. Yesterday, news broke that the company sold Bitcoin for the first time, which not only caused its stock price to plunge 6% but also accelerated Bitcoin's decline. In the past 24 hours, Bitcoin has tumbled more than 4%, breaking below $70,000 about four hours ago, and is currently trading at $69,420.

Bitcoin price chart, Source: TradingView

Bitcoin's break below key levels caused panic in the crypto market to spread to U.S. equities, triggering a sell-off in crypto stocks. As seen from the price movements above, MicroStrategy suffered the largest decline, primarily because the vast majority of its assets are in Bitcoin. Furthermore, the market fears continued selling by the company. Most concerningly, MicroStrategy and Bitcoin are entering a downward death spiral—as Bitcoin falls, MSTR's holdings incur unrealized losses, and leverage effects cause MSTR's stock price to crash, leading to a loss of market confidence that further exacerbates Bitcoin's decline.

However, will this spiral truly lead to a total collapse like Luna did? Currently, MicroStrategy has two "buffers" to prevent it from falling into a bottomless abyss: the lack of short-term liquidation risk for its long-term debt (preferred shares) and the cash flow defense provided by its traditional software business. Nevertheless, there is still room for MicroStrategy to trend lower.

From a technical analysis perspective, after Bitcoin broke below $70,000, it entered a vacuum zone, with the next support level at $60,000. If Bitcoin drops to that low, MicroStrategy may also fail to hold its current support at $140 and could head straight for the $100 mark. However, external factors could break the current death spiral between MicroStrategy and Bitcoin, with the most immediate being the upcoming U.S. economic data.

MicroStrategy stock price chart, Source: TradingView

This Wednesday, the U.S. will release ADP employment figures; this Thursday, the Bureau of Labor Statistics will publish the May non-farm payroll report. If these data points bolster market expectations for Federal Reserve rate cuts, MicroStrategy and Bitcoin will not only stop falling but could see a sharp rally. Conversely, prices for both could see further losses until the next significant psychological support level.