Cryptocurrency-Based Stocks Fall Amid Market Downturn



CBOE Bitcoin

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The once celebrated stocks of companies with bitcoin or blockchain exposure are falling alongside the top coins today. Corporate America has been looking to the blockchain and cryptocurrencies as a way to resonate with investors, a strategy that while profitable during the best of blockchain times has proven to backfire when cryptocurrency prices suffer declines.

Meanwhile, the bitcoin price suffered declines as steep as 20%, with the price recovering slightly to a 16% drop most recently. Ripple, meanwhile, lost as much as one-third of its market cap. The declines appear to be tied to chatter of tighter cryptocurrency controls in China that would place a wider ban on the trading of bitcoin and altcoins. US equities that investors previously celebrated for their blockchain presence are now being punished, as a more highly regulated cryptocurrency market threatens to take shape.

Not surprisingly, the Bitcoin Investment Trust (GBTC), which is a vehicle that institutional investors have used to gain exposure to bitcoin, filling a void left by a lack of an ETF, suffered a 10% drop at last check. The investment has shaved 20% from its value in 2018, from a high of 2,261 to today’s levels of under 1,780.

Keep in mind that GBTC similarly fell in sympathy with bitcoin in December when the bitcoin price slid for multiple consecutive days. Bloomberg pointed out then that sophisticated traders could profit from the narrowing of the gap between the GBTC NAV and the bitcoin price.

Overstock.com, which takes bitcoin as a form of payment and  run by tZERO’s cryptocurrency exchange founder Patrick Byrne, shed 5% at last check. As Overstock and Byrne became more embedded in bitcoin and blockchain in 2017, the stock advanced hand-over-fist, having increased nearly fourfold over all of 2017. Investors must sense that the bitcoin price will rebound similar to December activity or the Ovestock’s plight would be worse.

 

Honeymoon’s Over?

The honeymoon may be over for blockchain newcomer Eastman Kodak, which recently unveiled its plans to issue its own cryptocurrency via an upcoming ICO and saw its stock skyrocket by some 200%. The stock shed nearly 8% so far today, which may represent a buying opportunity for bullish blockchain investors, as Kodak hasn’t even launched its ICO or developed its blockchain-based platform for compensating photographers for their prints.

Kodak stock chart

Long Blockchain is off 3.5% after advancing nearly 290% in 2017 upon tacking on blockchain to its brand name, capitalizing on bitcoin’s quadruple-point gains last year and hoping to swing to a profit.

Chip stocks such as AMD and Nvidia have legitimate exposure to the blockchain, with their technology powering the mining operations for some cryptocurrencies. Both stocks are higher today, reflecting the ability of these companies to trade on their fundamentals.

Bitcoin Perspective

Meanwhile, while bitcoin, Ripple and pretty much all of the top 100 cryptocurrencies trading in the red today, it’s important to remember the 30% decline in the bitcoin price over a three-day period in December and similar declines in November that didn’t persist.

Featured image from Shutterstock.

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