2 Stocks to Avoid as Crypto Momentum Wanes

Bitcoin’s 2025 rally has stalled amid regulatory uncertainty and weaker sentiment, putting the crypto complex on track for one of its worst yearly showings since 2022 after BTC previously surged from ~$70,000 to >$120,000 following the 2024 election. Regulatory headwinds (House-passed Clarity Act unlikely to clear the Senate, tighter EU/Asian oversight, China ban) and ETF-based tradability have reduced the premium for crypto-exposed equities; SharpLink Gaming (SBET) converted into an Ethereum treasury with >$3 billion in ETH staked, posted a $0.63-per-share loss in Q3 2025 and shows bearish MACD/valuation risk, while TeraWulf (WULF) — up ~120% YTD — faces rising leverage (>$1.5 billion total debt, ~$5 billion in financing agreements) and broken 50-day SMA with a bearish MACD, leaving both names vulnerable if BTC weakens further.

Analysis

Market structure is rotating from equity proxies toward regulated spot crypto ETFs and custodial platforms; beneficiaries include exchange operators and custodians (Nasdaq/CME/Coinbase custody businesses) while high-beta treasury/mining plays (SBET, WULF, small altcoins) are losers as capital prefers spot ETF liquidity. Pricing power shifts to large-cap, liquid vehicles — expect tighter ETF spreads, wider equity idiosyncratic spreads, and continued outflows from illiquid alt tokens unless BTC stabilizes above its 30-day MA for >30 days.

Tail risks include a reclassification of ETH as a security (forced registration for treasury companies) and debt-covenant breaches at highly levered miners (WULF) that could force asset sales — both low probability but high impact over 3–12 months. Immediate (days) risk is technical cascade selling; short-term (weeks/months) is regulatory headlines and ETF flows; long-term (quarters/years) is legislative clarity (Senate vote expected 2026) that can re-price the whole sector.

Trade implications: favor concise, hedged shorts on SBET and WULF using 3-month put spreads sized ≤2% NAV each; rotate proceeds into exchange/custody exposure (NDAQ, COIN) and selective large-cap miners (MARA/RIOT) hedged with protective calls. Use BTC call spreads if BTC reclaims $100k (30-day MA crossover) and buy 6–12 week puts on miners if BTC breaks below $80k to hedge convex miner equity downside.

Consensus misses that regulatory clarity can rapidly re-concentrate flows into ETFs and custodians, creating short-squeeze risk in heavily-shorted microcaps — current pain may be overdone for well-capitalized custodians but underdone for thinly capitalized treasury-converts. Historical parallels: 2018 miner deleveraging led to consolidation and outsized returns for survivors; monitor on-chain staking concentrations and debt maturities as hidden triggers.

Key Decisions for Investors

• Establish a 1.5–2.0% notional short on SharpLink Gaming (NASDAQ:SBET) via a 3-month put spread (buy 1 ATM put, sell 1 25% OTM put) to cap premium; target 40–60% downside in 1–3 months, set stop-loss at 15% adverse move.
• Implement a 2% notional short on TeraWulf (NASDAQ:WULF) via buying 3-month 25–35% OTM puts (or equivalent put spread) due to debt/covenant risk; trim if WULF trades back above its 50-day SMA or if debt refinancing is announced within 60 days.
• Deploy proceeds into a 2–3% long position in exchange/custody exposures (e.g., NDAQ, COIN) and a 1–2% barbell in large-cap miners (MARA/RIOT) hedged by buying 2–3 week OTM calls to protect vs 10–15% upside squeeze risk; rebalance if BTC 30-day MA closes above $100,000 for 7 consecutive sessions.
• Buy a conditional BTC directional trade: staggered 1–2% allocations into 3-month call spreads if BTC reclaims and holds >$100k (buy 110k/140k call spread) or hedge miner exposure with 6–12 week puts if BTC falls below $80k. Monitor Senate crypto bill progress (vote/no-vote) over next 90 days as a binary catalyst.