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To a significant extent, the success Advanced Micro Devices, Inc. (NASDAQ:AMD) has enjoyed this year has been due to the “gold rush” of Bitcoin miners. Graphics Processing Units (GPUs) have been in high demand while the price of cryptocurrencies has been rising. However, the tide is shifting on two shores.
First, China’s regulatory entity has determined that new Initial Coin Offerings (ICOs) are illegal and recent ICOs should be refunded. This won’t likely lead to Bitcoin crashing again, but it does change the outlook for future gains in alternative cryptocurrencies, which will reduce demand for “mining equipment.” The other issue is that miners are shifting more towards ASIC processors over GPUs, which will likely be an even bigger problem for AMD in the near term.
We think AMD is at a technical pivot point where downside potential is far more likely than upside. Rising risks in the broader indexes and a change in the underlying fundamentals of the Bitcoin market should send the stock back towards its May lows.
‘Buy to open’ the AMD October 13 Puts (AMD171020P00013000) for a maximum price of $1.10.
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