Why Bitmine Immersion Technologies Collapsed 24.4% This Week

Shares of Bitmine Immersion Technologies (NYSEMKT: BMNR) slipped 24.4% this week, according to data from S&P Global Market Intelligence. With a recent business model change to a cryptocurrency treasury company focused on buying Ethereum, Bitmine Immersion stock has suffered along with the rest of the cryptocurrency market this week. In fact, as of the market close, it looks like the stock now trades at a price below the market value of the digital assets on its balance sheet.

Here's why Bitmine Immersion Technologies stock fell this week, and whether it is a buy at current levels.

Following crypto prices

After getting a new management team and raising over $7 billion through issuing new shares of common stock, Bitmine Immersion Technologies transformed itself into an investment vehicle for cryptocurrencies, specifically focused on Ethereum. As of its latest update, the company held 3.56 million Ethereum tokens on its balance sheet.

This encapsulates most of the company's business model. With this context, it is no surprise to see Bitmine Immersion Technologies stock correlate greatly with the price of Ethereum. The second-largest cryptocurrency behind Bitcoin is having a rough month, down 28% as indebted traders get liquidated by cryptocurrency trading platforms.

Why did cryptocurrencies such as Ethereum begin to fall? It is hard to say for certain, but they are usually correlated to the stock market, especially growth and technology stocks, which have had a rough week. Now, Bitmine Immersion Technologies trades at a market cap of around $10 billion, which is actually below the company's estimated value of all its investments of $11.8 billion a few days ago, on November 17th.

Image source: Getty Images.

Why Bitmine Immersion Technologies is a stock to avoid

Cryptocurrency treasury stocks such as Bitmine Immersion Technologies and Strategy (formerly MicroStrategy) are interesting concepts, but don't make logical sense for investors if you can buy cryptocurrencies directly. When investing in Ethereum through Bitmine you have overhead costs with running the business, risks that the management will further dilute shareholders, and risks that they will make an unprofitable mistake with your money.

Instead, if you are bullish on Ethereum, you should just buy it directly on a cryptocurrency exchange instead. The returns will be similar, and it will be much simpler for your portfolio.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.