American Bitcoin’s stock price crashed by more than 16%, erasing all the gains made on its first day of trading.
Summary
- ABTC stock price plunged by over 16%, erasing most of the gains made on Wednesday.
- Bitcoin treasury companies have fallen out of favor with investors.
- Trump-associated companies and cryptocurrencies have all plunged over time.
ABTC stock plunged to $6.70, down sharply from Wednesday’s high of $13, with its market capitalization falling to $6.2 billion.
Why ABTC stock is crashing
The crash happened because it is in a price discovery phase after its reverse merger that took it public this week. It is common for newly listed companies to experience volatility in the first days of trading.
For example, Circle stock price surged from $64 to nearly $300 within the first days as a publicly traded company. It has now plunged and is slowly approaching support at $100.
Similarly, Bullish’s stock price initially surged to $117 after its IPO in August and has now plunged to below $50.
The ABTC stock price is also plunging because Bitcoin (BTC) treasury companies have fallen out of favor from investors. A closer look at most of these companies shows that they are in a bear market.
MSTR stock price has plunged by over 30% from its highest point this year. Similarly, Metaplanet, which is seen as Japan’s MicroStrategy, has plunged by 61% from the year-to-date high.
One reason these companies are selling off is their high premium to their Bitcoin holdings. In MSTR’s case, there is a $38 billion gap between its Bitcoin holdings and its enterprise value. With Metaplanet, the gap is over $4 billion.
The other reason is that the Bitcoin treasury industry has become highly saturated, with over 100 public companies holding close to 1 million coins.
American Bitcoin distinguishes itself from other treasury companies in that its holding strategy involves using mined bitcoin instead of purchasing it in the public market. This means that its acquisition cost will be lower than that of other companies.
ABTC stock price has also plunged because of the poor track record of Trump-associated investments. Trump Media shares are down by more than 68% from its October 2024 high.
Similarly, the Official Trump (TRUMP) price has fallen by over 90% from its January high. The recently-launched World Liberty Financial token is down by 50% from its Monday high.
Will the American Bitcoin stock recover?
It is too early to determine whether the ABTC stock price will recover anytime soon. However, based on the track record of Trump-associated assets and the performance of other recently launched IPOs, chances are that the stock will continue falling.
The stock will also continue falling as demand for Bitcoin treasury companies wanes. Most importantly, there are valuation concerns as the company has a market capitalization of over $6 billion against its Bitcoin holdings worth $267 million.
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