The stock price of American Bitcoin, a company linked to the Trump family, experienced a significant decline of over 40% on Tuesday, hitting its lowest point since May of this year.
Reasons Behind the Stock Plunge
The ABTC stock plunged to $2, marking an 86% decrease from its year-high. This sharp fall has reduced its market capitalization to $1.9 billion, a substantial drop from the $8.6 billion it held a few months ago. This decline occurred on the same day that Bitcoin (BTC) and other cryptocurrencies saw a rebound, with Bitcoin's price jumping by over 4.5% and surpassing the critical resistance level at $90,000.
The downturn in ABTC stock was notable as other companies within the Bitcoin treasury industry experienced gains. For instance, MSTR stock surged by over 4%, and Trump Media saw a rise of 1%. Bullish and GD Culture stocks also showed positive movement. Typically, Bitcoin treasury companies perform well when BTC is in an uptrend, as this generally enhances the value of their holdings.
American Bitcoin, which was spun off from Hut 8 Mining and co-founded by Eric Trump, holds a significant amount of Bitcoin, with 4,002 coins on its balance sheet. The current value of these coins exceeds $363 million, which is considerably less than its current market capitalization.
There was no single identifiable catalyst for the ABTC stock's crash on Tuesday. This suggests that the decline might be attributed to selling pressure and panic selling among retail traders, who have incurred substantial losses since the company's public debut.
Furthermore, the stock's drop could be influenced by its higher valuation multiple when compared to its competitors. For example, while Metaplanet and Strategy have a negative mNAV ratio, ABTC maintains a multiple of 5. This higher multiple is likely a consequence of its distinct business model, which differs from other treasury companies. American Bitcoin primarily accumulates Bitcoin through its mining operations rather than purchasing it from external parties. The most recent financial results indicated that the company's revenue increased to $64 million in the third quarter, with a net income of $3.4 million.
Technical Analysis of ABTC Stock Price
The daily chart analysis reveals that the ABTC stock price has been on a downward trend for the past few months. This decline followed a double-top pattern observed at $14.50, with a neckline at $3.70, which was its lowest point in June of this year. A double-top formation is often indicative of further downward movement.
The stock has consistently traded below its 50-day moving average. The Average Directional Index has climbed to 23, its highest point since October. Additionally, a death cross has formed, signifying that the 50-day and 200-day moving averages have crossed.
Consequently, the double-top pattern suggests the potential for further declines, possibly reaching the psychological support level of $1.50.