ASX blockchain small caps in 2019: The gainers are few, but ripe
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The figure of speech “few but ripe” was the motto of mathematician Carl Gauss who only published the ideas he felt were complete — which were considerably few of them.
Such a saying would be applicable to ASX blockchain stocks because only eight out of several dozen have gained substantially. The average gain among these stocks is 112 per cent.
Why? The resurgence of bitcoin this year? Considering there’s far more to blockchain than cryptocurrencies and the gainers are little focused on crypto, unlikely.
The stocks that have gained this year are making revenue and have commercial partnerships that make the technology a reality with tangible benefits for users.
While the hype about blockchain being as world-changing as the Internet could be far-fetched, that doesn’t mean the technology won’t get anywhere.
For example, Fintech Chain (ASX:FTC) is up 233 per cent this year after Chinese banks began adopting its payment software. While bitcoin is accepted, you can still pay conventionally.
In a sense the blockchain sector is maturing. Like any other small cap industry, you can only promise and not deliver for so long. The blockchain stocks that have gained stand head and shoulders above their peers in gaining revenue traction.
The biggest winner was 8Common (ASX:8CO) which is in the know-your-customer space. It is up 386 per cent this year thanks to its revenue (it is making $1m per quarter) and contract wins, including with the federal government.
Mobile-gaming focused Animoca Brands (ASX:AB1) has gained 60 per cent this year. It too is making revenue and has secured strategic partnerships to help it grow. Blockchain technology will allow mobile game users to make in-game purchases and foster ownership of digital assets.
Yojee (ASX:YOJ) is up 55 per cent this year. Last month it signed an agreement with logistics leader Geodis. Foster Stockbroking analyst Matthew Chen argued “this agreement de-risks the YOJ service offering for global logistics operators”.
He predicted this would be a $US8m annual revenue opportunity and raise the company’s visibility.
Security Matters (ASX:SMX), which has also gained 55 per cent this year, uses blockchain to read and store the barcodes its technology creates. This allows any solid, liquid or gas to be invisibly and irrevocably “marked” and identified.
There are dozens of industries where its technology can be useful from coins to cows. Since listing last October it has applied its code to over 500,000 items — well exceeding its prospectus promise of 50,000.
One of the criticisms of cryptocurrencies is that they have no intrinsic value – they only have value if others think they will have value.
One of the biggest losers is YPB Group (ASX:YPB), which was suspended for a few weeks while the ASX investigated a deal with First Growth Funds (ASX:FGF) to create a digital token. First Growth had been unable to sell any tokens due to an illiquid market.
While YPB has been reinstated, it is down 74 per cent in 2019 and FGF are still suspended after the ASX looked into other token-creation deals – specifically one with Aberdeen. Last week the company told the ASX its had sold just $UST9,000 of those tokens when it listed with a $US50m market cap.
Remember this publicity stunt?
— Yassin Hankir #savedroidICO (@YassinHankir) April 18, 2018
This looked like another exit scam – where a crypto founder ran off with ICO-raised money with neither likely to be seen again. This incident was deliberately faked to draw attention to the lack of regulation surrounding ICOs.
But too many others have been exit scams for investors’ liking, and even if crypto companies are well intended, investors have retreated in droves. In May, Cointelegraph reported the market was down 97 per cent in 2019.
With the best performing blockchain stocks having little or nothing to do with crypto, it would be hard to assert the market has returned to its 2018 levels, or will any time soon.