I’ll admit, I was quite optimistic about where the crypto market was heading leading up to the Bitcoin (BTC-USD) halving earlier this year and in the months that followed. The stars seemed to be aligning. Interest rate cuts were on the horizon, the halving took place, and the launch of Bitcoin ETFs all materialized in the same year. I thought these factors combined could propel Bitcoin’s price to new heights once the halving’s supply shock kicked in and rate cuts put more money in people’s pockets to invest.

However, my outlook has darkened in recent weeks. While it may be premature to declare a full-blown crypto winter, I’m skeptical that Bitcoin and the broader crypto market can thrive if the Nasdaq, S&P 500, and other major indexes start to correct sharply. A recession would be especially challenging, as Bitcoin has never weathered one before. The brief 2020 downturn saw Bitcoin plummet along with other speculative assets. This time around, things may not be so different after all.

Don’t get me wrong, a recession could present a phenomenal buying opportunity for cryptos. But in the near term, I believe it’s prudent to start trimming ultra-speculative blockchain-related stocks before any potential storm clouds gather on the horizon. The halving and rate cuts alone likely won’t be enough to buoy prices if the broader market turns decisively bearish. Altcoins have already capitulated, and blockchain stocks may not be far behind.

Coinbase (COIN)

Coinbase (NASDAQ:COIN) operates a cryptocurrency exchange platform that makes most of its money from trading fees. The company recently reported strong Q2 2024 earnings, with revenue surging 105% year-over-year to $1.45 billion, beating analyst estimates. These results were driven by a rebound in crypto trading volumes with the launch of Bitcoin and Ethereum (ETH-USD) ETFs. However, I believe Coinbase is probably one of the riskiest stocks you can buy outside of penny stocks.

Why, you may ask? Well, this company is heavily reliant on crypto trading volume, especially from the altcoin market, which has been crushed in recent months. With a potential recession looming, I fear a crypto winter could be close. Such a scenario would deal a major blow to Coinbase’s business even without a big Bitcoin downturn. Thus, I view COIN stock as one of the top blockchain stocks to sell right now.

Despite the stock still being up 126% year-to-date, there is huge downside risk here. Several analysts have recently lowered their price targets on Coinbase, citing concerns about slowing trading volumes and headwinds from potential interest rate cuts. In my view, it’s wise to go risk-off mode with this volatile name and take profits while you still can.

MicroStrategy (MSTR)

MicroStrategy (NASDAQ:MSTR) provides enterprise analytics and mobility software, but has become better known for its massive bitcoin holdings. The company has been on a wild ride, using debt and equity to amass 226,500 Bitcoin worth around $15 billion as of August 2024. That’s a rather risky “all in” bet on the volatile cryptocurrency.

In my view, investors should steer clear of this stock. MicroStrategy is essentially an incredibly expensive, highly leveraged proxy for Bitcoin at this point. Despite the huge bitcoin price surge, the company still reported a Q2 net loss of $102.6 million. Servicing that massive debt load isn’t cheap.

The company’s software business is deteriorating and may not generate enough cash flow to cover interest payments if the crypto market sours. MicroStrategy’s Bitcoin gambit is completely untested in a severe recession. With storm clouds gathering on the economic horizon, I believe the best move is to take profits on this extremely speculative name before a potential crypto winter arrives in full force this year.

Riot Platforms (RIOT)

Riot Platforms (NASDAQ:RIOT) operates as a Bitcoin mining company in North America. The company has been struggling lately, despite the Bitcoin halving event and record-high Bitcoin prices that should have boosted its business.

Admittedly, I was pretty optimistic about Riot Platforms heading into the 2024 Bitcoin halving. With years to prepare and the unprecedented rise in Bitcoin’s price, you’d think the company would have been well-positioned to capitalize on these catalysts. However, Riot’s recent Q2 earnings report was nothing short of tragic, with the company missing both revenue and earnings expectations by a wide margin.

Riot’s revenue fell 8.8% year-over-year to $70 million, and it posted a staggering net loss of $84.4 million. This Bitcoin mining company had ample time to gear up for the halving, yet appears to be floundering. Not only that, Riot has started diluting shareholders to an extensive degree. As the chart below shows, outstanding shares of RIOT stock have ballooned.

I’ve lost faith in Riot’s management to right the ship. If you were lucky enough to make a profit on this stock, I think it’s high time to cash out. For others who haven’t yet built a position, I think the smart thing to do is to steer clear of this blockchain stock before things get even uglier.

On the date of publication, Omor Ibne Ehsan 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.