The most wealth-creating sector this year is undoubtedly crypto stocks. In May this year, crypto stocks experienced an accelerated trend, with leading coins such as Ethereum, Sol, TRX achieving tenfold gains within 1-2 weeks. Stocks like SBET, UPXI, and SRM became hot topics in the market. However, two crypto US stocks, YHC and MFH, recently plummeted by 70-80%. What caused this? Does the sharp decline of individual stocks indicate a crisis in the narrative of crypto stocks?

Crash Crisis and Causes

First, let's talk about YHC, a Bitcoin-related stock. It rose from around $1.2 to $11 on June 27, then began to crash on July 17, falling to $1.79 within three trading days, a drop of 83% from its peak;

MFH's performance was even more surprising. On July 21, it opened at $6 and dropped directly to $1.3 in one day, a drop of over 70%, and has since slightly rebounded to $2.7.

What caused the rapid short-term decline?

It must be said that the US stock market, as a high-volatility market, is never short of profit opportunities. However, due to no price limit, small-cap stocks can experience prolonged crashes when they fall.

YHC company name LQR House, whose main business includes developing premium limited edition spirits brands, establishing exclusive wine clubs, and conducting internal and external brand marketing through an exclusive agreement with a US e-commerce portal. Listed in August 2023, but after a brief consolidation period, it fell from $90 to around $1, and only reversed after announcing its Bitcoin strategy this year.

Since this stock is a small-cap stock, its volatility risk is inherently higher. As of now, YHC only has a market cap of $19 million. Additionally, after consecutive surges, on July 21, SEC filings revealed that George Patrick Lambeth, who owns 10% of the company, sold 180,000 common shares of LQR House (YHC) at a price of $546,318, creating a scenario of large shareholders selling off at high prices, trapping many investors at the peak.

MFH company name Mercurity Fintech, also a Chinese-listed stock.

Relatively speaking, MFH has deeper layout in the blockchain field, with certain fundamentals. On June 27, Mercurity Fintech officially joined the Russell 2000 Index, reflecting the recognition of the capital market.

On July 21, the company disclosed a series of major news. First, it announced a $200 million equity credit agreement with Solana Ventures Ltd. to launch a digital asset treasury strategy based on the Solana blockchain. MFH saw a rise at the opening. However, subsequent announcements were shocking, as the company stated that it had priced a direct public offering of approximately 12.5 million shares and an equal number of warrants. The pricing for these shares was $3.50 per share, and the exercise price for the warrants was also $3.50 per share, with a term of five years. At that time, the stock price was already above $5, and the market reacted with a sharp drop, panic selling to around $1. The extreme drop of MFH had elements of overreaction.

Long-Term Trends of Crypto Stocks

MicroStrategy stock has risen from $14 to $413 in three years, a gain of over 3150%, far outperforming BTC and most high-volatility altcoins. MSTR has become a benchmark for crypto stocks, with its market cap reaching over $110 billion. Ethereum's current market cap is only over $300 billion. If MSTR were compared to a cryptocurrency, its market cap would clearly be a giant.

Moreover, during the deep bear market in 2022, MSTR passed the market test. Even though MSTR continued to increase its holdings while BTC was at $60,000, when BTC fell to over $15,000, the company's financial condition did not face a collapse crisis, which indirectly reflects MSTR's stable financing and buying strategy. Therefore, it is clear that the model of crypto stocks can be sustainable.

However, apart from MSTR, there is currently no other crypto stock that can match MSTR. Many companies are called the MSTR of ETH, SOL, or other mainstream coins, but none of them have been tested in the bear market, and their scale is only in the billions of dollars, which is a huge gap compared to MSTR. Therefore, in the long run, we should pay attention to which company can withstand the bear market and become a real leading stock of mainstream coins like Ethereum. This will be a good opportunity.

The sharp drop of MFH and YHC is essentially the "pain" in the process of combining cryptocurrencies with traditional finance, rather than a signal of narrative collapse. The current market is in a critical phase of transitioning from concept hype to value-driven. Enterprises with technological moats, compliance advantages, or real cash flows will occupy a more favorable position after market cleansing. For example, Coinbase's Base network TVL exceeds $14.9 billion, and its positioning as "cryptocurrency financial infrastructure" has been recognized by the market.

How to Deal with High Volatility of Crypto US Stocks

Nevertheless, the sharp drop of MFH and YHC should serve as a warning to investors. After all, a single-day drop of 70% could be catastrophic for those heavily invested. Therefore, the primary principle for investors is to set stop-loss orders, ensuring that losses are acceptable.

Investors need to be wary of two types of risks: first, "trend-chasing" companies without substantial business support; second, high-leverage strategies that rely excessively on cryptocurrency price fluctuations.

Author: ChainThink, Aaron

Reviewer: ChainThink, Charlie