What happened

Shares of online retailer and blockchain company Overstock.com (NASDAQ:OSTK) tumbled on Monday as the market continued to digest CEO Patrick Byrne's plan to sell the retail business next year and focus solely on blockchain. The stock surged on Friday after Byrne's interview with the Wall Street Journal was published, but much of that rally has now been undone. Shares of Overstock were down about 14.8% at 11 a.m. EST Monday.

So what

Overstock is a minor player in the e-commerce market. The company has generated $1.8 billion of revenue over the past 12 months, with a net loss topping $250 million. Overstock has been marginally profitable over the past decade, with operating margins hovering around 1% in its best years. E-commerce giant Amazon and smaller players like Wayfair have left Overstock in the dust.

A coin with a bitcoin symbol on the face.

Image source: Getty Images.

In addition to e-commerce, Overstock has been investing in various blockchain-based businesses via its wholly owned Medici Ventures subsidiary. These initiatives include tZero, a blockchain-based trading platform that has yet to launch commercially and is currently hemorrhaging cash. Byrne put tZero's monthly losses at about $2 million.

But Byrne sees massive potential for blockchain. "We think we've got cold fusion on the blockchain side," Byrne told the WSJ. Speaking of Medici Ventures, he said, "We have maybe several multibillion-dollar properties in there."

Now what

Overstock's plan to dump the e-commerce business and focus solely on blockchain comes as cryptocurrency prices are crashing. Bitcoin has lost more than 80% of its value since peaking late last year. The digital currency has tumbled more than 40% in the past month alone.

Blockchain has potential applications beyond cryptocurrency, and Overstock is betting that going all in on the technology will pay off in the long run. But there's a real risk that blockchain could turn out to be more hype than anything else. Overstock's move to sell the e-commerce business is a gamble, and a risky one at that.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Wayfair. The Motley Fool has a disclosure policy.