Bit Brother stock price has been in a strong sell-off this year as it plunged by more than 76% this year, making it one of the worst-performing penny stocks. Shares of the widely popular penny company have retreated to a record low of $2.52 even as othe Bitcoin mining stocks have surged. This drop has brought its total market cap to $1.5 million.
What is Bit Brother?
Bit Brother is a small cap company listed in the United States. It is a Chinese company that was formerly known as Urban Tea as its main business was to sell organic teas in key cities like Beijing and Shenzhen.
Bit Bother is no longer known for its tea business since in 2021 the compay pivoted its business to Bitcoin mining. Now, it hopes to become a major Chinese Bitcoin mining company, competing with other giants like Marathon Digital, Riot Platforms, and Cipher Mining.
However, things are not going on well for the company because of the rising cost of mining equipment. This situation will likely worsen after the next halving event, which is set to happen in April. The impact of halving is that it will lead to more mining difficulty and reduce the number of coins miners receive
Despite these woes, Bit Brother has been widely popular among day traders these days. Data shows that millions of shares of the company exchange hands every day. On Tuesday, the total volume stood at over 1 million shares.
This popularity is mostly because of the strong demand by meme stock traders who are still active in platforms like Reddit and StockTwits. These investors prefer in trading penny stocks because they can buy more shares and make better returns when it makes some wild swings.
This trading strategy has been successful to most people. For example, stocks like HOLO have jumped by more than 3000% in the past few months.
Is BETS a good investment?
There are a few reasons why BETS is not a good long-term investment. First, the company is highly dilutive as it raises cash from the market. Data shows that its total outstanding shares have jumped to over 155k, up from last year’s low of 10k.
The share count has increased sharply as the company has continued to dilute its owners. Most recently, it filed a giant $500 million mixed shelf offering, which is a significant amount for a company whose market cap stands at $1 million.
Second, the company is in a highly competitive business, meaning that it will struggle to gain market share. Remember that Bitcoin mining tends to go through boom and burst cycles. Companies like Core Scientific and Argo Blockchain have come on the verge several times before.
Third, it is a Chinese company that does not publish its financial results regularly. The last financial release came in June last year. Its TTM revenue stood at $2.9 million while its net loss jumped to $92.2 million.
Bit Brother stock price forecast
Turning to the four-hour chart, we see that the BETS stock price has moved sideways this year even after its stock split in January. This reverse split helped the company avoid Nasdaq delisting for now. It has remained at 25-day moving average while the Average Directional Index (ADX) and Average True Range (ATR) have retreated. The ADX and ATR indicators measure the strength of a trend and volatility, respectively.
Therefore, the outlook of the Bit Brother share price is still bearish, meaning that it will likely continue plunging as its demand wanes. However, it is quite risky to short a company that is widely popular among traders. In this case, a minor announcement could push the stock surging, leading to sa short squeeze.
