Why Xunlei Ltd. Stock Tumbled Today

What happened

Shares of Chinese internet company Xunlei Ltd. (NASDAQ: XNET) continued to crumble on Tuesday. The stock had gained about 475% since Oct. 12, when the company announced a cryptocurrency project. Those gains have been unraveling as the euphoria fades. The stock was down about 15.4% at market close on Tuesday.

So what

Xunlei announced its "Wanke coin mining" project on Oct. 12. The stock rocketed higher on pure speculation. That rally ended in late November.

On Nov. 29 Xunlei issued a statement regarding its cryptocurrency project in an attempt to quell reckless speculation:

Since peaking on Nov. 24, shares of Xunlei are down about 45%.

Now what

Shares of Xunlei are still up more than 200% since the beginning of October, prior to the cryptocurrency announcement. That gain was driven by wild speculation. Cryptocurrency mania may keep the stock afloat for a while, but those speculating on Xunlei shares should be prepared for more declines.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.