The BitMine stock price has crashed over the past few months, marking a major setback for Tom Lee, one of the top analysts in the stock and crypto markets. BMNR was trading at $39, down by over 70% from its highest level this year. This article explores the three main reasons why the stock has more downside risk in the near term.
BitMine Stock Has Weak Technicals
The first main reason the BMNR stock price has more downside is its weak technicals. For example, the daily timeframe chart shows that it recently moved below the 50-day Exponential Moving Average (EMA), a sign that bears are in control.
BitMine has also moved below the lower boundary of the symmetrical triangle, which forms part of the bearish pennant pattern, one of the riskiest patterns in technical analysis.
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The Relative Strength Index (RSI) and the MACD indicators have also continued to move downwards over the past few weeks. Therefore, the most likely scenario is that it continues to fall, with the immediate target at $29, the lowest level in July.
BMNR Stock to Crash as Industry Pressures Mount
The other main reason why the BitMine stock price may crash is that the Digital Assets Treasury (DAT) industry is struggling this year. Most companies continue to drop as the hype that existed a few months ago fades.
The crash has affected the company’s market-cap-to-net-asset-value multiple, which has dropped from 5.6 earlier this year to 1.2 today.
This means its stock is trading closer to its underlying assets, with the market re-rating them. There is a risk that the company’s mNAV will continue falling in the coming months.
Additionally, the BitMine stock price has little dry powder left after spending billions of dollars to accumulate Ethereum. This means that it may be forced to raise additional capital, potentially through ATM share sales, to continue accumulation.
On the positive side, there are reasons why the stock may bounce back soon. For example, there is a chance the Ethereum price will bounce back, as it has formed a bullish flag pattern on the daily chart. Tom Lee believes that the coin will end the year at $16,000.
An Ethereum price rebound may help boost its stock in the coming weeks or months.
The other reason is that the company is highly shorted, with a short interest of 7.5%. This means that it may go through a short squeeze in the near term.
Additionally, Ethereum has some solid fundamentals, including the rising ETF inflows and its utility. BitMine is also generating money from its BitMine holdings through staking.
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