TeraWulf Plunges 12.3% Amid Bitcoin Slump and Share Dilution Fears—What’s Next for the Compute Miner?

Summary
• TeraWulf (WULF) tumbles 12.3% intraday to $12.565, its lowest since December 2023
• Bitcoin’s 3.5% drop and a recent dilutive preferred share conversion spook investors
• Options volatility surges, with 20 contracts trading at 82–153% implied volatility
• The stock trades at 52-week lows of $2.06 to 52-week highs of $17.05, now near critical support levels

Today’s 12.3% collapse in TeraWulf’s shares has sent shockwaves through the compute and crypto sectors. The plunge follows a perfect storm of Bitcoin’s retreat and a controversial share conversion that raised red flags about capital structure. With the stock now near its 200-day moving average of $7.43 and key options expiring in 5 days, the next 48 hours could define the stock’s near-term trajectory.

Bitcoin’s Retreat and Share Dilution Spark Investor Exodus
TeraWulf’s 12.3% intraday freefall is directly tied to two catalysts: Bitcoin’s 3.5% decline and a recent dilutive preferred share conversion. As a compute miner pivoting toward AI infrastructure, TeraWulf’s business model relies on Bitcoin’s price to justify its capital-intensive expansion plans. With Bitcoin’s retreat undermining revenue visibility, investors are recalibrating expectations. Compounding this, the conversion of preferred shares—typically a bullish event—has instead triggered fears of further dilution, as the company’s share count ballooned by 31.24% leverage in key options. This dual blow has eroded confidence in TeraWulf’s ability to fund its next-gen data centers without compromising equity value.

Data Center Sector Volatility Intensifies as EQIX Rises 1.28%
While TeraWulf’s shares crater, sector leader Equinix (EQIX) defies the trend, rising 1.28% on the day. This divergence highlights the sector’s bifurcation: traditional colocation players like Equinix benefit from stable demand, while speculative compute miners like TeraWulf face headwinds from crypto volatility and capital structure risks. TeraWulf’s 4.56 debt-to-equity ratio contrasts sharply with Equinix’s 0.33 ratio, underscoring the former’s precarious leverage. As AI-driven data center demand grows, TeraWulf’s aggressive expansion may struggle to match the operational efficiency of established peers.

Bearish Options and ETFs to Capitalize on TeraWulf’s Freefall
• 200-day average: $7.43 (below current price)
• RSI: 65.48 (neutral)
• MACD: 0.566 (bullish divergence)
• Bollinger Bands: Lower band at $10.38 (critical support)
• Kline pattern: Short-term bearish trend + bearish engulfing candle

TeraWulf’s technicals suggest a bearish near-term outlook, with the 52-week low of $2.06 acting as a psychological floor. The stock’s 10.99% turnover rate and 3.83 beta indicate high volatility, making options a compelling play. Two top options stand out:

• WULF20251219P12.5 (Put, $12.5 strike, 12/19 expiry):
- IV: 109.97% (high volatility)
- Leverage ratio: 19.52% (moderate)
- Delta: -0.4738 (moderate sensitivity)
- Theta: -0.0090 (slow time decay)
- Gamma: 0.2475 (high sensitivity to price swings)
- Turnover: $102,417 (liquid)
- Payoff (5% downside): $0.78 per contract (12.5% of strike price)
This put option offers asymmetric upside if the stock breaks below $12.50, with high gamma amplifying gains in a sharp move.

• WULF20251226P13 (Put, $13 strike, 12/26 expiry):
- IV: 89.49% (reasonable)
- Leverage ratio: 11.46% (low)
- Delta: -0.5614 (high sensitivity)
- Theta: -0.0050 (minimal decay)
- Gamma: 0.1944 (moderate sensitivity)
- Turnover: $230,854 (high liquidity)
- Payoff (5% downside): $0.63 per contract (9.5% of strike price)
This put benefits from high delta and low theta, making it ideal for a gradual decline. Both options align with the bearish engulfing pattern and key support levels.

Action: Aggressive bears should prioritize WULF20251219P12.5 for short-term volatility, while WULF20251226P13 offers a safer, longer-term bet. Watch for a breakdown below $12.39 (intraday low) to confirm the bearish case.

Backtest TeraWulf Stock Performance
The backtest of WULF's performance after a -12% intraday plunge from 2022 to now shows favorable results. The 3-Day win rate is 52.67%, the 10-Day win rate is 52.48%, and the 30-Day win rate is 57.43%. Additionally, the maximum return during the backtest period was 21.48%, with a maximum return day at 59.

TeraWulf’s Freefall Tests Investor Resolve—Here’s How to Position
TeraWulf’s 12.3% plunge has exposed the fragility of its capital structure and crypto-dependent business model. While the stock’s 65.48 RSI and 0.566 MACD hint at potential mean reversion, the 10.99% turnover rate and 3.83 beta suggest volatility will persist. Investors should monitor the $10.38 Bollinger lower band and $7.43 200-day average as critical support levels. Meanwhile, sector leader Equinix (EQIX) rising 1.28% underscores the sector’s divergence. For those willing to bet on a rebound, the 1.27% rally in EQIX offers a benchmark for sector strength. Act now: Short-term bears should target WULF20251219P12.5, while longer-term investors may consider WULF20251226P13. Watch for a breakdown below $12.39 to confirm the bearish case.