Why is American Bitcoin Stock Plummeting While BTC is Rising?

American Bitcoin's stock price tumbled by over 40% on Tuesday, reaching its lowest point since May.

Key Takeaways

American Bitcoin stock (ABTC) fell over 40%, hitting a low of $2, down significantly from its earlier peak.
The decline coincided with a rebound in Bitcoin and other cryptocurrencies.
Panic selling among retail investors may have contributed to the stock's plunge.
ABTC's valuation is higher compared to peers, partly due to its mining-based business model.
Recent financial performance showed revenue growth, but technical indicators hint at potential further stock price declines.

American Bitcoin stock

Understanding the Decline of American Bitcoin Stock

The ABTC stock fell to $2, marking an 86% drop from its peak earlier this year. This sharp decline has reduced its market capitalization to $1.9 billion, down from $8.6 billion just a few months ago.

Interestingly, this crash coincided with a rebound in Bitcoin and other altcoins. Bitcoin's price increased by more than 4.5%, surpassing the significant resistance level of $90,000. Meanwhile, stocks of other companies involved in Bitcoin treasury operations, like MSTR and Trump Media, saw gains; MSTR rose over 4% while Trump Media climbed 1%.

Typically, Bitcoin treasury companies tend to perform well when Bitcoin is on an upward trend, as it generally enhances the value of their assets. American Bitcoin, which was spun off from Hut 8 Mining and co-founded by Eric Trump, holds a significant amount of Bitcoin—4,002 coins—valued at over $363 million, considerably less than its current market cap.

There wasn't a specific reason for the ABTC stock's drop today. This suggests that the decline may stem from panic selling among retail investors who have incurred significant losses since the firm went public. Additionally, the stock price may have fallen due to its higher valuation multiple compared to its competitors. For instance, while Metaplanet and Strategy have a negative mNAV ratio, ABTC's multiple stands at 5.

This elevated multiple could result from its unique business model, which focuses on acquiring Bitcoin through mining operations rather than purchasing from third-party vendors. Recent financial results indicated that the company's revenue increased to $64 million for the third quarter, with a net income of $3.4 million.

Technical Analysis of ABTC Stock Price

American Bitcoin stock
Source: TradingView

The daily price chart reveals a decline in the ABTC stock over the past few months. This downturn followed a double-top formation at $14.50, with a neckline at $3.70, reached in June. A double top pattern often suggests further downward movement.

Currently, the stock remains below the 50-day moving average, and the Average Directional Index has climbed to 23, the highest level since October. The formation of a death cross, where the 50- and 200-day moving averages intersect, indicates a bearish trend.

As a result, the double-top pattern suggests potential further decline, possibly reaching the psychological level of $1.50.