Hut 8 Corp. Plunges Another 12% Today. When Will the Bleeding Stop For This Bitcoin Miner?
Key Points
Recent Bitcoin price action has done little to prop up Hut 8's valuation, as most Bitcoin miners have been hit hard in today's session.
A leveraged Bitcoin mining model works in a rising price environment, but some investors appear willing to call it quits.
In combination with significant underperformance from a key subsidiary, there's not a lot to like about the outlook for this company right now.
- 10 stocks we like better than Hut 8 ›
Hut 8 (NASDAQ: HUT) is seeing yet another day of intense selling pressure, with shares of HUT stock down 12% in today's session alone (as of 10:15 a.m. ET). As I touched on last week, there is one key reason that appears to be driving this move, which is again in play during today's session.
In combination with yet another slump in the price of Bitcoin (CRYPTO: BTC), which is hovering around $88,000 per token and still down approximately 30% from its recent peak, concerns about where the world's top cryptocurrency is headed are another key factor driving investor unease in HUT stock today.
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Let's dive into the two key catalysts that appear to be taking Hut 8 lower, and why this particular Bitcoin miner isn't receiving any love from investors right now.
Bitcoin, ABTC valuations continue to impact Hut 8
Source: Getty Images.
Bitcoin's daily decline of around 1.4% isn't anything out of the ordinary. Now, in the stock market, wild daily swings would be considered abnormal and worth diving into. However, swings of 1%-3% today are generally perceived by investors as a rather orderly move, so that's unlikely to be a key driver moving the needle for Hut 8 today.
Now, that's not to say that Hut 8 and its Bitcoin mining peers don't have plenty of exposure to Bitcoin-they do. According to The Block, Hut 8 currently holds 10,669 Bitcoin on its balance sheet, with a valuation that implies investors are willing to pay roughly 3x the value of this Bitcoin to gain exposure to the company's Bitcoin generation potential.
And through the company's majority stake in American Bitcoin Trust (NASDAQ: ABTC), a company that's associated with Eric Trump, this number grows quite substantially. Therefore, there's added leverage on top of today's Bitcoin price move, which is clearly driving downbeat investor sentiment.
That said, the company's significant holdings in ABTC stock, which are down another 4.6% at the time of writing, are continuing to impact Hut 8 in a way that may not be favorable to investors. This spinoff was supposed to free up capital for Hut 8 to transition toward a more open-source model, in providing compute to other AI and data-hungry customers around the world. Thus far, this move doesn't appear to be working out as planned.
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Chris MacDonald 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.
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