Without question, Bit Origin (NASDAQ:BTOG) represents one of the most speculative ideas you can find in the equities sector. Priced like a lotto ticket, this security — which can be had at time of writing for less than two dimes — is an enigma to most suits on Wall Street. They wouldn’t be able to tell you if it’s a cryptocurrency miner or a frozen dumpling manufacturer (it actually used to be the latter).
Still, buried beneath the chaos of the penny stock wilderness may be a story worth reviewing — not necessarily from the typical angle of cute Web3 narratives or Fibonacci retracement levels but from arguably the one perspective that matters the most: market behavior.
Headquartered in Singapore, Bit Origin is a micro-capitalization crypto mining firm operating through its U.S.-based subsidiary SonicHash. It runs about 3,200 rigs mining the benchmark blockchain asset. Further, the company recently secured a $6.47 million investment to build a new 25 megawatt (MW) mining data center in Cheynne, Wyoming.
Although it demonstrates strong ambitions, the main problem with BTOG stock is volatility. Since the start of this year, BTOG has lost almost 81% of value, a simply staggering implosion. To be fair, other blockchain miners — such as MARA Holdings (NASDAQ:MARA) — haven’t exactly performed all that spectacularly. Still, a 14% loss for MARA is a relative cakewalk.
It’s important to recognize the hefty risks facing BTOG stock as it depends on several moving parts, with volatile crypto prices being just one factor. Nevertheless, while the overall fundamental narrative may be questionable for Bit Origin, its behavioral setup in the market may be singing a different tune.
One of the common mistakes in market analysis is applying an almost singular focus on scalar metrics, such as price or revenue. While these figures can be noteworthy milestones, they only represent the point at which demand is exercised; they’re not the equivalent of demand itself.
Instead, demand is a simple, binary construct: it’s either happening or it’s not happening. Conceptually, there are no half-demand states of existence. At any given moment in time, investors are either net buyers of a security or they are not. Put another way, demand represents defined, discrete events that can be categorized, quantified and ultimately projected.
Why this framework is significant lies in the demand profile’s ability to foster useful analytics. By categorizing demand as behavioral states, an investor can track the transition from fear to greed and vice versa. Effectively, certain behavioral profiles make the deck either hot or cold for the speculator, allowing for a smart, strategic approach to extracting alpha.
Over the past 10 weeks, BTOG stock printed “3-7” sequence: three weeks of upside interspersed with seven weeks of downside, with a negative trajectory across the period. Historically, whenever this sequence has materialized, there’s a 64.1% chance that the following week will see upside.
If so, the median return under the positive pathway clocks in at 6.22%, which is quite compelling. However, the drawback is that if the bears win out, the median loss is projected to be 7.43%. While this risk-reward profile is asymmetric against the bulls, the probabilistic risk is empirically lower.
Not only that, as a baseline, a one-week long position in BTOG stock has only a 41.61% chance of being profitable — quite a poor performance. However, with the 3-7 sequence featuring odds of 64%, the deck has become temporarily hot for speculators.
It’s a gamble, of course, but one that might be enticing to the right trader.
While the 3-7 sequence has often resulted in near-term upside, sustainability is another matter. After all, BTG stock dropped almost 96% over the past 52 weeks. Clearly, it hasn’t been able to generate meaningful traction, which makes overexposure to this penny stock quite risky.
There may be two ways to play Bit Origin here. First, a quick nibble might not be the most terrible idea with pocket change that you can afford to lose. This week, it’s all about moving and then exiting.
The next big opportunity could arrive near the end of this month. Based on prior historical trends, BTOG may gradually rise from the end of May to roughly the third week of June.
While no one will mistake Bit Origin as a stable investment, even terrible performers occasionally have their moment in the sun. With BTOG stock, a specific demand profile has historically led to an upsurge in buying activity. If the same trend materializes again, speculators could enjoy a quick pop.
Just make sure to secure any profits and move along. While the deck may be hot right now, it can also freeze over in a hurry.
