Falling share price and dwindling revenues all but explains why MGT Capital Investments Inc (OTCMKTS:MGTI) underperformance in the market. The stock just like the broader cryptocurrency market has been on the receiving end for the better part of the year. By the look of things, it could take some time before the stock bottoms out.
MGT Capital Investments Price Action
Short sellers remain in firm control, in line with sentiments in the broader cryptocurrency marketplace. Since the start of the year, the stock has lost more than 90% in market value an underperformance that raises serious concerns about its’ long-term prospects.
MGT Capital is currently trading at levels never seen before at the $0.23 mark. It will take a groundbreaking development for the stock to bounce back. Any pullback from current lows faces immediate resistance at the $0.70 mark. Below the $0.70 mark, the stock remains susceptible to further declines on surging short selling pressure.
What Does MGT Capital Investments Do?
MGT Capitals is one of the biggest bitcoin miners in the world. The company operates mining facilities in Sweden through which it gets rewarded from every block it mined. The company’s mining portfolio is made up of 6,800 Bitmain equipment as well as 50 GPU-based Ethereum Mining Rigs
Bitcoin Price Plunge
MGT Capital has lost more than 90% in market value this year on investor sentiments in the sector turning sour on Bitcoin price imploding. The flagship cryptocurrency is down by more than 60% for the year after a meteoric rise last year.
With Bitcoin price implosion, MGT Capital is not generating as much money as it used to at the peak of a bull run in the cryptocurrency space. Concerns of a potential bubble burst in the sector has also gone a long way in spooking investors, something that has seen investors shun investments with exposure to the cryptocurrency business.
Investors have continued to push the stock lower having become clear that the company’s revenue is not growing as they used to. The company reported Bitcoin mining revenues of $409,000 for the second quarter, versus $388,000 reported last year same quarter.
However, second-quarter revenue was less than half, revenues of $956,000, reported in the first quarter, as the Bitcoin price was flirting with record highs of $20,000. A wider than expected net loss of $6.5 million for the second quarter compared to $4.2 million reported a year earlier has all but gone to fuel the short selling pressure.
Bitcoin Price implosion and revenue drop in Q2 are not the only woes that continue to clobber MGT Capital Investment in the market. The Securities and Exchange Commission has already commenced legal action against the company’s Chief Executive Officer, Robert Ladd.
The SEC has reportedly filed Civil Charges against multiple individuals and entities on claims that they violated security laws in connection to certain Micro Caps. According to the Chairman of the board, Robert Holmes, the company and its officers have complied with obligations under their subpoenas.
In response to the SEC Probe, MGT Capital Investments has confirmed that the Chief Executive Officer, has taken a leave of absence to address the SEC charges.
“We will not be distracted in our mission to grow our cryptocurrency mining operations. We have been analyzing several low-cost energy opportunities in the U.S. and Sweden and look forward to updating shareholders more fully in the near future,” said Stephen Schaeffer, Chief Operating Officer.
In pursuit of growth opportunities, the company has entered into a collaborative venture with Bit5ive LLC. Under the terms of the agreement, MGT Capital Investments is to design and manufacture a crypto mining pod for operating a 1 MW mining hardware. The Pod is to be branded and sold by Bit5ive as Pod5
MGT Capital Investments finds itself in a precarious position in the market as sentiments in the Cryptocurrency market continue to go south. The stock’s sentiments and prospects in the market are depended on the performance of Bitcoin in the market. With the flagship cryptocurrency, under pressure, the stock also looks set to continue trading in a downtrend.
The bear run that has hit the stock looks set to continue until Bitcoin price bounces after this year’s sell-off. That said, it might be wise to take a back seat when it comes to investments in MGT Capital Investment.
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Disclosure: We have no position in MGTI and have not been compensated for this article.