While the allure of cryptocurrency investments has undoubtedly captivated the market’s attention, it’s perhaps wise for investors to consider blockchain stocks to sell. This is not a call made in isolation. A discernible shift seems underway, where risk appetite among investors is curbing.
At the heart of this change in sentiment is the Federal Reserve. By hinting at another potential rate hike before the year concludes, the Fed might inadvertently dampen enthusiasm for growth-centric sectors, including blockchain. As borrowing costs inch upwards, these nascent industries might bear the brunt.
It’s also worth noting the unpredictability associated with the Fed’s actions. While officials tout a strategy aimed at achieving a “soft landing,” the results aren’t always as anticipated. A case in point is the inflationary challenge.
Despite increasing rates to curb inflation, it persists in defying expectations, maintaining a high trajectory. Given these potential economic headwinds and uncertainties, it might be a prudent strategy for investors to revisit their portfolios, particularly weighing the merits of blockchain stocks to sell.
Blockchain Stocks to Sell: Canaan (CAN)
To be clear, the topic of blockchain stocks to sell isn’t about casting aspersions on specific enterprises such as Canaan (NASDAQ:CAN). Rather, all we’re doing is acknowledging basic realities. When the underlying crypto market performs well, it tends to take the blockchain mining space with it. However, when cryptos perform poorly, it conversely capsizes mining specialists.
All I ask is that you look at the income statement associated with blockchain stocks. For Canaan, revenue peaked at $782.3 million, then slipped to $634.7 million, matching the erosion of demand in cryptos. Further, the net income profile is more alarming. After posting $313.8 million on the bottom line, 2022 saw a drop to $70.5 million. In the trailing-12-month (TTM) period, Canaan posts a net loss of nearly $280 million.
To be fair, the implied volatility (IV) curve shows a largely direct correlation between IV and the strike price; that is, the higher the strike, the (generally) higher the IV. Still, options flow data shows that institutional investors haven’t touched CAN since Aug. 10. Thus, I’d rather sit on the sidelines.
Argo Blockchain (ARBK)
Billed as a world-leading cryptocurrency miner, Argo Blockchain (NASDAQ:ARBK) claims to champion the use of renewable sources of power to support the growth and development of blockchain technologies. While I don’t want to make too many pronouncements, I believe investors should seriously consider the claims about renewable crypto mining skeptically.
For instance, The Verge pointed out a simple math problem: “If crypto mining gobbles up about 5 gigawatts of electricity in Texas but only incentivizes about 2 gigawatts of clean energy, then the industry is still going to be responsible for the extra pollution created by that excess 3 gigawatts.”
In other words, renewable energy sources like wind and solar can’t operate 100%. So, given the growth of crypto mining, some bleed over into non-renewable energy consumption is expected. And that might put fiscally vulnerable entities like Argo in a tough position. Thus, it’s one of the blockchain stocks to sell or at least wait out on the sidelines.
At first glance, TeraWulf (NASDAQ:WULF) doesn’t seem to rank among the blockchain stocks to sell. Another renewable energy-focused crypto mining enterprise, TeraWulf shares gained nearly 93% of equity value since the start of this year. While that’s encouraging, you must also consider the recent framework. In the trailing one-month period, WULF fell more than 28%, posing concerns for stakeholders.
For me, the biggest takeaway about TeraWulf centers on options flow, which exclusively focuses on big block trades. In July of this year, many major traders – likely institutional investors bought call options at various strike prices, paying hefty premiums for the privilege. However, a month later, sentiment started to sour.
Indeed, many large traders – and it could be the same ones hedging their bets – started to sell (write) call options. Further, as the weeks went on, more sold calls materialized, which is risky. Basically, option writers are on the hook if the countervailing parties exercise their contracts. Even with that risk, big traders continue to write calls, telling you what you need to know about crypto sentiment.
On the date of publication, Josh Enomoto did not have (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.