BaniTheBig

$IREN's share price… I’ve read many different takes on why $IREN is supposedly on this downward trajectory. Some claim it’s due to $BTC weakness, others say it’s just distress in the AI sector. Either way, a large number of $IREN shareholders do seem concerned and wonder if we have already put in a long-term top. In this post I’ll unpack all of it & provide you with my take on $IREN's recent share price performance. First of all, even though Bitcoin’s price action has been disappointing over the past couple of months, I doubt it has had a significant impact on $IREN's share price performance. Yes, $IREN is still one of the largest "BTC miners", however, its share price has been totally detached from Bitcoin’s price action for a while now. In my opinion, $IREN's recent dip in share price isn’t just unsurprising, it’s something that was long overdue anyway. A stock can’t go up in a straight line forever… From early April until last week $IREN pulled a >15x – over a span of just ~7 months. You hardly ever see these kinds of moves in the stock market, not in a timeframe this short. So far, this has been a generational run, one that was unsustainable at this current pace. I do think we have much more to go before putting in a long-term top, but the share price taking a breather and resetting sentiment is exactly what you want to see if you are a long-term holder. This correction creates the base for the next round – it’s standard market psychology & cyclicality. I also think most investors have the wrong perspective on price action in general. And I mean “perspective" literally. Most people look at $IREN's chart on a linear scale (pic 1) and see a catastrophic collapse in share price over the past ~10 trading sessions. Meanwhile, I exclusively look at the logarithmic chart of $IREN (pic 2) and all I see is a small dip in the grand scheme of things. On a linear chart, each step on the y-axis is the same dollar amount, while on a logarithmic chart, each step is the same percentage move. So on a log chart, a move from $5 to $10 (100%) takes up the same vertical space as a move from $20 to $40 (also 100%), even though the absolute dollar move is much larger in the second case. That’s why log charts are so much better for comparing the present to the past. Every bit of vertical distance represents the same percentage change, so you keep proper perspective on drawdowns and rallies. On a linear chart, once a stock has run 10–15x, the right side of the chart gets vertically “stretched,” and any pullback looks like a total collapse. In $IREN's case, the current dip looks like the worst crash ever on a linear chart, even though we’re “only” down a bit over ~40% from the recent highs. Earlier this year, during the April flush, we were down roughly 70% from the local highs we made in December. In percentage terms, that April move was far more violent. The log chart shows this clearly; the linear chart doesn’t. One reason why I was so amazed by $IREN when I discovered the stock early last year was the fact that its log chart looked so volatile. With most stocks, volatility is contained in a tight range on a log chart. What may appear as a volatile stock, even on a log chart, may just be minimal moves in % terms. However, $IREN is a different beast… Its high volatility means corrections may be violent, but the potential upside is so much greater than with most other stocks. You can easily configure your current chart setup into a logarithmic one on TradingView (not a sponsor, but I use this free tool all the time to look up charts). Now, getting back on topic. I believe it comes down to 3 reasons why $IREN is currently dipping: 1) It ran up too far, too quick, without any major pullbacks in between 2) Buy the rumor, sell the news 3) Sector weakness Point 1 I just discussed – every asset needs sentiment resets once in a while, completely normal and natural market behavior. Regarding point 2, it’s pretty obvious that last week was a classic "buy the rumor, sell the news event" (very common in markets). Many $IREN holders bought the stock in anticipation of a major hyperscaler deal, buying the stock BEFORE the deal, believing the stock would pump more once a hyperscaler agreement actually materializes. However, the opposite happened; the stock dropped soon after the deal was made public – primarily because there were no buyers left – everyone had already bought the stock beforehand. In market terminology you also call this "priced in". The market had already priced in a deal of that magnitude before it even happened. These sorts of "buy the rumor, sell the news" events are incredibly common in all types of markets. Whenever there is an obvious “event” that most market participants can anticipate beforehand (evident from price rallying up prior to the event), chances increase drastically that the good news has already been priced in and that "day x" will be more disappointing than most expect. Another high-profile example of a buy the rumor, sell the news event was the launch of Bitcoin’s first-ever spot ETF ( $IBIT ) in early 2024. When it became obvious that the launch was imminent, BTC rallied strongly in the weeks and months prior to it. Then on launch day (11. Jan, 2024) BTC started a sell-off that continued for a couple of weeks. Of course, BTC recovered and nearly doubled soon afterwards, but the ETF launch was still a "buy the rumor, sell the news" event. These types of events can also quickly snowball into a larger correction for a few psychological reasons. As I said before, many investors buy the asset regardless of fundamentals or even chart technicals, solely on the basis of thinking "they are early", because day x hasn’t happened yet (in $IREN's case day x = hyperscaler deal). Now that the first deal has happened, that kind of buyer isn’t there anymore. Moreover, some short-term investors or traders got into $IREN with the sole intention to sell the stock after the first major deal gets announced – anticipating a large pump on day x and then selling out on top. We got a brief pump when the deal was announced and that group of people sold, leading to selling pressure at the highs. Others with a similar plan may have wanted the stock to rally a bit more, but once they saw the stock dipping, they may have gotten spooked and sold a portion or all of their holdings soon after, leading to even more selling pressure. Many who took profit in the $65–79 range likely had positions that were up multiples on their entry price and so de-risking their portfolio at that point seemed reasonable. Now, sub-$60 and even sub-$50 we are getting into the "panic range". Selling pressure at these levels primarily comes from "investors" who are panicking about $IREN's long-term potential. They might think the stock has put in a long-term top and its best days are over. They see the recent dip and are getting cold feet – selling, just to make the bleeding stop. They might also believe the economics of the company's recent deal with Microsoft can’t be good because, after all, we are down significantly since the deal was announced. ... They are fooled by efficient market theory and believe "the market is trying to tell them something", i.e. that the deal was bad. They may even think that any new deal that’s announced in the future may just lead to further drops in share price – they are basically rationalizing current price action and extrapolating from it (something you should never do, unless you are doing it from a market-psychology POV). Now finally, we also have general AI sector weakness on top of everything else, which is compounding the downside pressure. $CRWV & $NBIS recently had earnings and both fell short to some extent. Nebius missed on revenue expectations & CoreWeave had to revise down their Q4 guidance due to their reliance on third-party developers who are behind delivery schedules – something $IREN doesn’t even have to deal with because they develop their data center infrastructure in-house. One might think that hiccups amongst competitors should be a good thing for $IREN, after all this is a very competitive industry. And with that assessment you might be right, but as I alluded to before, the market is severely irrational and won’t price these factors in immediately. Instead, these negative industry-related news items are short-term headwinds for the entire sector, because of algorithms that trade sector-wide and un-informed "investors" that see CoreWeave's colossal dump after earnings and think something like "Uhh, $CRWV crashed big-time after its earnings, the same might happen with $IREN, because they are kind of the same thing right? Let’s sell just in case" … Not realizing the primary reason why $CRWV sold off in the first place is due to something that could never happen to $IREN (third-party developer issues). So, where does this leave us and what are my expectations going forward? After having spent 1000s of hours researching this company, this short-term price action doesn’t bother me in the slightest – I’m still incredibly bullish on $IREN over the mid to long term and nothing has changed in that. If anything, I’m now more bullish AFTER this $MSFT deal since it now marks a thesis-defining milestone in my investment. There are some industry-wide risks that I’m monitoring closely, but I firmly believe $IREN is in an incredibly strong position to weather any potential macro headwinds. I do, however, believe that these are the times that truly test investors and show the importance of building high conviction in your holdings, which is only possible when you understand your holdings from the inside out. If you haven’t done the research, you’ll undoubtedly make irrational decisions along the way – primarily due to a lack of data. Conclusions that may seem logical at first could be missing the mark completely if you simply had more knowledge. Now that retail market participation is at all-time highs, markets are even more prone to violent swings in both directions, catching many off guard who haven't done sufficient due diligence on their holdings. My upcoming “project” is tackling exactly that need and tries to simplify this research process in a time-saving & engaging way for retail investors & institutions alike. I’m looking forward to sharing more about it over the coming 24 hours… Until then, have a good one ;) Cheers! ✌️