August 2024 was supposed to be a period of great optimism for the cryptocurrency and blockchain landscape. Although the vast use cases of blockchain technology are growing way beyond the confines of crypto, the price of Bitcoin (BTC-USD) will invariably have a major impact on the performance of stocks in the industry in the short term.
Bitcoin’s status as a safe haven investment has once again been tested as the cryptocurrency fell more than 17.5% over the first five days of August alone. The drop came as the S&P 500 dipped almost 5% over the same period, illustrating the close bonds cryptocurrencies have with traditional finance.
With 2024 already forming the backdrop to a Bitcoin halving event and the launch of both BTC and Ether exchange-traded funds (ETFs), cryptocurrency enthusiasts would have identified August as the month that could see the beginning of a long-awaited crypto bull run.
However, these frailties have brought fresh doubt over the impact of a cryptocurrency market rally and its impact on blockchain stocks.
With many blockchain stocks based in the lucrative Bitcoin mining landscape, factors like a crypto bull market will have already been factored into the stocks’ performance to a degree, making August a key month to sell should signs of weakness in the crypto market linger. These three stocks could be a clear sell should these struggles persist:
CleanSpark (CLSK)
Cryptocurrency mining stocks have moved into uncertain territory in the wake of Bitcoin’s halving event in April, and with the volume of BTC distributed to miners halved overnight, there are likely to be fresh challenges to operational models and their success in the coming months.
With the distribution of Bitcoin to miners halving recently, stocks like CleanSpark (NASDAQ:CLSK) will be dependent on the increase in the value of BTC to atone for this shortfall.
So far, market volatility has conspired to keep the value of Bitcoin lower, which has spelled trouble for CleanSpark’s Wall Street performance.
The stock fell more than 38% between the beginning of July and the first week of August. With CLSK’s Q2 2024 revenue falling short of $110.88 million estimates by weighing in at $102.1 million, it’s clear that all isn’t well for holders.
According to CleanSpark’s July mining report, the firm sold only 2.54 Bitcoin for the month, signifying the lower selling pressure the stock has experienced. This could represent a gamble for the firm should BTC values fail to grow in any meaningful way in the future.
Bitfarms (BITF)
Another Bitcoin mining stock, Bitfarms (TSE:BITF) will also be facing the pressures of operating in a post-Bitcoin halving climate.
The stock itself has endured a volatile year so far. After expectations of $0.11 losses per share in Q2 came in at $0.07, the stock mounted a short-lived market recovery before falling significantly in the early stages of the third quarter.
Bitfarms stock sank 24.86% between July and the first week of August, and more volatility is likely to be on the way for investors with the company recently adopting a ‘poison pill’ strategy to fend off a hostile takeover from another crypto mining stock, Riot Platforms, in June.
The move saw Bitfarms distribute new shares to dilute Riot’s stake in the company to thwart the firm’s attempted takeover. However, fending off hostile takeovers is just one of many issues that Bitfarms faces.
The company rejected an initial takeover offer in April, claiming that the company was ‘significantly undervalued’, but in the wake of the cryptocurrency market’s recent fragility and BITF’s struggles on the Toronto Stock Exchange, we may not see the stock’s value increase in Q3 2024.
Riot Platforms (RIOT)
The instigator of Bitfarms’ hostile takeover bid, Riot Platforms (NASDAQ:RIOT) is also suffering an extremely challenging 2024 at present.
When a cryptocurrency mining stock is shedding 50% of its value in the opening eight months of a year when Bitcoin reaches a new all-time high price, it should be a clear warning sign for investors.
Worryingly, renowned Wall Street short-seller Kerrisdale Capital targeted the stock in June, with the firm reporting that a collapse could be on the way. Interestingly, the report suggested longing Bitcoin was a suitable alternative to investing in RIOT. This indicates that Kerrisdale is targeting the stock for its operational frailties rather than the blockchain landscape as a whole.
Another sign of weakness stems from Riot director Hannah Cho’s decision to sell 27,861 shares of the company’s stock for a total value of $239,883, bringing her total holdings down to 81,290 shares.
The timing of the sale, when the stock has been facing severe pressure, could suggest a lack of optimism for the future. With many blockchain stocks still expectant of a cryptocurrency market rally in the coming months, August has served as a timely reminder that nothing is certain in the volatile world of crypto.
On the date of publication, Dmytro Spilka did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.