As of 3:45 p.m. ET, shares of Hut 8 Corp. (HUT 5.28%) are down 12%, a move that's significantly larger than similar downside moves we've seen in the crypto space today.
NASDAQ: HUT
Key Data Points
A top Bitcoin miner with significant exposure to the world's largest cryptocurrency, price fluctuations are certainly one reason for today's decline. The price of Bitcoin has once again slid below the key $90,000 mark. This decline of more than 28% from Bitcoin's recent peak is suggestive that investors are taking a much more risk-off approach to certain sectors.
If Bitcoin's decline continues, companies that hold significant amounts of Bitcoin on their balance sheets (mostly Bitcoin treasury companies and Bitcoin mining firms like Hut 8) could see continued downside from here.
That said, there's another key reason why HUT stock is sinking today. Let's dive in.
A decline in a key spinoff providing investors with concern
Source: Getty Images.
Before diving into the key catalyst I think is taking Hut 8 lower today, it's essential to put today's move into context. HUT stock is still up almost exactly 100% on a year-to-date basis, inclusive of today's move. Thus, this is a stock that has run hot heading into a period in which crypto prices are softening. So, that's definitely a key piece of understanding the puzzle that is this crypto mining firm.
However, I think another key factor worth considering is the fact that Hut 8's spinoff of a still-majority-owned American Bitcoin Corp. (ABTC 7.26%) hasn't gone as well as expected. Well, it did initially out of the gate, with ABTC stock soaring to a high of $14.65 per share following its spinoff. Today, those same shares are worth a little less than $1.80 each (down nearly 3% on the day, again). That's good for a total decline of more than 85% in the span of about three months.
Companies that are valued not only on their own underlying business models, but also on their partial ownership of other entities, can become difficult to value on a sum-of-the-parts basis. However, noting that Hut 8's majority ownership stake in ABTC stock has declined so precipitously of late, I can understand why some investors are looking to diversify away from this Bitcoin miner right now.
Hut 8, along with many of its peers, has sought to diversify and redeploy some of its computing power to AI and data center initiatives, leaving plenty of bullish catalysts for investors to latch onto. That said, the company's ABTC holding is providing a pretty significant headwind for shares of this crypto miner right now.
