At first glance, cryptocurrency miner CleanSpark (NASDAQ:CLSK) would appear to be a discounted opportunity, especially given the “FOMO” — or the fear of missing out — that often arises in the blockchain space. Just back in November, CLSK stock was trading hands at nearly $18 a pop. A return back to that level would mean almost a doubling in market value. Still, investors should be cautious with this thought process.
Invariably, though, it will be difficult to contain the speculative urge. Much of the reason why CLSK stock crumbled had to do with a sector sympathy trade. As NPR reported, China is eager to burst Silicon Valley’s artificial-intelligence bubble, leading to a freakout on Wall Street. Specifically, DeepSeek, a Chinese AI company, introduced a new and low-cost model, thus directly competing against American hegemony in the space.
However, the silver lining for CLSK stock could be that DeepSeek doesn’t single out the cryptocurrency sector. Indeed, the impact is more residual and speculative. Essentially, greater advancements in AI could lead to the reallocation of resource and investment priorities. Such a pivot toward machine intelligence could create challenges for blockchain miners like CleanSpark.
Plus, there’s the obvious point: innovation-related entities have skyrocketed in recent years. Based on the normal ebb and flow of the market, it’s only natural to assume that a correction would materialize. These headwinds don’t have much to do directly or specifically with CleanSpark. Therefore, a bullish long-term posture toward CLSK stock seems reasonable.
To be sure, analysts are projecting fiscal 2025 sales to land at $744.87 million. If so, that would be almost double last year’s revenue of $378.97 million. With a current sales multiple of 6.6X — considerably lower than the 12.88X average witnessed during the first quarter of last year — CLSK stock seems enticing.
Unfortunately, looks can be deceiving.
CleanSpark may very well represent one of the more confusing ideas in the market right now. Even from the standpoint of technical analysis, CLSK stock seems to be signaling a discounted opportunity. It’s possible that from November 2023 to the present juncture, CLSK may be printing a formation similar to a bullish pennant.
If so, the security offers significant upside potential, with the bulls likely targeting the psychologically critical $20 level under the optimistic scenario. However, the empirical data doesn’t align with this enthusiasm, presenting pensiveness toward the overall narrative.
When pricing data over the past five years for CLSK stock is viewed stochastically — that is, devoid of any other context aside from the temporal — investors will notice a clear negative bias. Week to week, there is only a 50.77% chance that a position entered at the beginning of the period will be profitable by the end of it. On a four-week basis, the odds diminish to worse than a coin toss to 47.47%.
Put another way, under normal conditions, you’re more likely to lose money by betting on CLSK over any one-month period. However, a question emerges: what happens to pricing behaviors when the stock suffers a severe downturn?
On Monday, CLSK stock fell roughly 11%. Over the trailing five days, it has lost more than 14%. Whenever CLSK loses between 10% and 20% during a one-week period, the odds of bullish success fall to 43.1% over the subsequent four weeks. In other words, about a month after an extreme-fear event, there’s a greater risk that CLSK will be underwater than profitable.
Generally speaking, the passage of time makes it less likely for CLSK stock to bounce higher from the anchor event. Therefore, if you are adamant about buying CleanSpark, the odds favor doing so this week. Starting from February, statistical trends favor the bears, not the bulls.
For speculators, the bottom line comes down to this: the success ratio for bullish traders is too low for comfort, while the failure ratio for bearish traders is not high enough to inspire much confidence. Any position taken in the next few weeks should only be reserved for the most aggressive of market participants.
If that happens to be you, the aforementioned market intelligence suggests that those seeking a long position may consider a bull call spread for the options chain expiring Jan. 31. By the end of this week, statistical trends suggest that if the positive scenario materializes, CLSK stock could rise by 10.08%. Potentially, that would translate to $11.34 by Friday’s closing bell.
With that in mind, gamblers may consider the 10/11 bull call spread (or buy the $10 call, simultaneously sell the $11 call). At time of writing, the breakeven threshold for this transaction stands at a reasonable $10.44.
Over the next four weeks, however, CLSK stock is likelier to decline in value. Statistical trends point to $8.63 by the options chain expiring Feb. 21 as a downside risk target. Again, aggressive speculators may consider the 10.50/9.00 bear put spread (buy the $10.50 put, sell the $9 put). This transaction features a breakeven price of $9.75 and almost four business weeks for the thesis to pan out successfully.
