Tom Lee’s BitMine Immersion Technologies (NYSE:BMNR) stock has dropped by 52% this year, erasing billions of dollars in value. It has also fallen by over 90% from its highest point in July last year, and this trend may continue in the near term as it faces some major risks.

BitMine Stock May Drop as Ethereum Risks Rise

The biggest risk facing BitMine stock is that Ethereum (CRYPTO: ETH), its main asset has been in a strong downward trend, and its fundamentals and technicals point to more downside. 

Ethereum’s demand in the exchange-traded funds (ETF) industry has waned this year. These funds have shed over $1 billion in assets this year and now hold just $9.3 billion in assets, which are equivalent to 4.5% of its market cap. 

The same is happening with its ecosystem, which has continued to wane this month. For example, the total value locked (TVL) in its ecosystem has dropped to $37 billion from last year’s high of $95 billion. Most dApps in its ecosystem, like Uniswap and Aave have all shed billions in value in the past few months. 

Ethereum’s network fees have continued falling this year. It has made just $88 million this year, its worst performance in years. It made $523 million last year, and $9.9 billion at its peak in 2021.

Ethereum is Nearing a Death Cross Pattern

Technicals also suggest that the ETH price has more downside. The weekly chart shows that ETH is about to form a death cross pattern, which happens when the 50-week and 200-week Exponential Moving Averages (EMA) cross each other. 

This will be the first time that the coin has formed a death cross pattern on the weekly chart in years. In most cases, this pattern normally leads to more downside over time.

On top of this, it has slumped below the key support of $1,763, invalidating the double-bottom pattern whose neckline is at $2,465. Therefore, there is a risk that the stock will drop towards the key support of $1,000. 

Such a retreat will affect BitMine’s business as it has become the biggest Ethereum holder in the world. It has bought 342k coins in the past 30 days, bringing its holdings to 5.62 million. With ETH falling, its unrealized losses have soared to over $10 billion.

BitMine is Facing Macro Risks

BitMine stock is also facing some major external risks. The most important one is that it is in an unfavored industry today. Investors are largely focusing on the booming artificial intelligence industry this year. This explains why spot Ethereum ETFs have shed assets, while stock ETFs have added over $1 trillion in assets. 

The company is also at risk after the recent Federal Reserve interest rate decision, in which officials hinted that they will hike rates later this year. Historically, Ethereum and other risky assets underperform whenever the Fed is hiking rates.

On the positive side, the company is soon hitting its 6 million Ethereum buying target, which should reduce its dilution. Instead, the company will start generating a return by staking its Ethereum holdings.

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