Obscure and highly speculative blockchain venture Bit Brother (NASDAQ:BETS) is finally in the news for a good reason. During the midweek session, BETS stock is soaring as the underlying benchmark cryptocurrency asset nears an all-time high. In addition, a short squeeze appears to be materializing for the otherwise embattled entity.
Billed as a multifaceted corporation with operations spanning business management in China, Bit Brother started this month on a far-less auspicious note. On Feb. 2, management disclosed that it received notification from Nasdaq regarding the exchange operator’s intent to delist BETS stock. In the disclosure, Bit Brother noted that it was scheduled to appeal the decision on Feb. 27 (yesterday).
Nasdaq’s concerns are more than justified. Since the beginning of this year, BETS stock has lost around 61% of its market value — inclusive of today’s rally. Currently, its market capitalization sits at less than $3 million. Further, in the fiscal year that ended June 2023, Bit Brother suffered a net loss of $92.16 million atop sales of only $2.88 million.
Nevertheless, crypto sentiment has reached a fever pitch. With the benchmark blockchain asset crossing above $63,000 for the first time since November 2021, the dramatic resurgence has lifted several crypto-related enterprises.
BETS Stock Also Rises on a Possible Short Squeeze
While the rabid enthusiasm for virtual currencies likely represents the primary catalyst for BETS stock, it may not be the only tailwind. Indeed, Bit Brother’s backdrop points to a classic speculative spark: the short squeeze.
According to Fintel, the short interest for BETS stock stands at just over 162% of its float. That’s helped modestly by a short interest ratio of 2.27 days to cover. Essentially, this is the time needed for the bears to cover their position based on average trading volume.
Confirming the outrageous metric is Yahoo Finance, which shows short interest (as of Feb. 15, 2024), clocking in at 147.28%. For clarification, Yahoo Finance states that it receives its short interest data from Morningstar. Combined with massive crypto demand, BETS stock could conceivably race higher.
Driving speculation of virtual currencies is the benchmark asset’s upcoming halving event. This protocol reduces the rewards tied to mining endeavors by half, which should crimp supply. Of course, less supply of a hot commodity should significantly increase its price.
Why It Matters
Before investors jump aboard BETS stock, they should realize that the underlying company is extremely risky. Prior to its Bit Brother name, the company previously operated as Urban Tea. Per the accompanying press release, the business at the time involved distributing and retailing specialty tea products.
However, management decided to start operations in “the business of blockchain technology and cryptocurrency mining.” Over the past 52 weeks, BETS stock has hemorrhaged 99.7%.
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On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
