Cryptocurrencies are witnessing a much-required correction, with bitcoin (BTC) slumping nearly 50% since last month. U.S. regulators’ concerted efforts now to formulate regulations surrounding cryptocurrency trading in the United States, a Chinese crackdown on crypto mining, and ESG concerns have been the major factors behind Bitcoin’s slump. And because BTC’s correction is expected to continue for some time, we think overvalued crypto stocks Silvergate Capital (NYSE:SI), Riot Blockchain (NASDAQ:RIOT), and Bit Digital (BTBT) are best avoided now. Let’s discuss.The untethered cryptocurrency market is slowing down following a spectacular rally over the past year. Bitcoin (BTC) has retreated more than 40% since hitting its $64,863.10 all-time high on April 14 due to multiple factors. A recent Chinese crackdown on cryptocurrency trading in the country following the launch of digital Yuan, and China’s goal of reducing its carbon footprint have been key factors driving down bitcoin prices in the past couple of weeks. This is because most of the bitcoin mining operations are concentrated in China.
The U.S. earlier this month also announced actions regarding the trading of bitcoins. The U.S. Treasury Department has released a new rule stating that any cryptocurrency transaction of more than $10,00 must be reported to the IRS. Rising environmental concerns surrounding cryptocurrency mining has also contributed to the decline by bitcoin and other cryptocurrencies. Also, on May 12, Tesla, Inc. (NASDAQ:TSLA) founder and CEO Elon Musk suspended the purchase of vehicles using bitcoins due to environmental concerns regarding bitcoin mining, following which bitcoin saw more than $365 billion in market capitalization wiped away. U.S. Treasury Secretary Janet Yellen has also raised concerns regarding the potential environmental impact of cryptocurrency mining.
Because ESG investing is gaining prominence worldwide and regulations surrounding cryptocurrencies are increasing, we think the crypto market correction is likely to continue for some time. In light of this, we think overvalued cryptocurrency stocks Silvergate Capital Corporation (SI), Riot Blockchain, Inc. (RIOT), and Bit Digital, Inc. (BTBT) are best avoided now.