Shares of Bitmine Immersion Technologies (BMNR 2.30%) have fallen around 20% this week, according to data from S&P Global Market Intelligence. The newly formed cryptocurrency treasury operation focused on Ethereum has fallen alongside a crash in the aforementioned crypto's price this week. In the last month alone, Ether's price has fallen 36%, which is leading to huge unrealized losses on its crypto investment.
Despite this, Bitmine continues to buy more Ether for its portfolio. Does that mean you should buy the dip on this stock?
NYSEMKT: BMNR
Key Data Points
Crashing crypto prices
Earlier this year, Bitmine got a new start with prominent technology and crypto investors Dan Ives and Tom Lee spearheading an operation to turn the company into a publicly traded cryptocurrency treasury business. However, unlike Strategy and its focus on Bitcoin, Bitmine would be focused on Ether/Ethereum, the second-largest cryptocurrency by market value.
The company began to sell shares of its common stock to buy the cryptocurrency, already amassing over 3% of the outstanding token supply. At cost, this was a $16.3 billion investment with an average Ether price of around $3,800. Well, now Ether has been cut in half, and so have Bitmine's cryptocurrency holdings. The stock is simply going to trade along with the value of Ethereum, so when the crypto's price falls, Bitmine will follow. That is all that happened this week.
Investors may be getting nervous about management decision-making. The company has invested $200 million in Beast Industries (the company behind Mr. Beast) and has just seen its President retire for unknown reasons. Both add uncertain to Bitmine's future.
Image source: Getty Images.
Time to buy the dip?
It is difficult to value Bitmine Immersion Technologies stock. Future gains (or losses) will be largely determined by Ethereum's direction in the coming years. If you are confident it will be higher, then Bitmine Immersion stock is an easy buy today.
But why would an investor be confident in this? Cryptocurrency prices are highly volatile and lack predictability, given their lack of underlying earnings power. What's more, Bitmine's management is now a revolving door, and investing in the holding company of a famous YouTuber.
This is a highly risky stock. Avoid buying the dip on Bitmine Immersion Technologies right now.
