Bitcoin is set for another good year, but will there be any crypto players left on the ASX?
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After a year to forget in 2018, cryptocurrencies had a better year in 2019. Although bitcoin hit its 2019 high mid-year, it still finished the year 88 per cent higher than it started.
2019 Total Returns…
Nasdaq 100 $QQQ: +39%
Oil $USO: +33%
S&P 500 $SPY: +31%
REITs $VNQ: +29%
Small Caps $IWM: +25%
EAFE $EFA: +22%
EM $EEM: +18%
Gold $GLD: +18%
Investment Grade $LQD: +17%
High Yield $HYG: +14%
US Bonds $AGG: +8%
US Dollar $UUP: +4%
Cash $BIL: +2%
— Charlie Bilello (@charliebilello) December 31, 2019
What’s next is anyone’s guess, but investors are anticipating the next “bitcoin halving” will happen on May 20.
This means 50 per cent less bitcoins will be generated every 10 minutes and crypto industry executives think prices will rise, just like the last time it happened in 2016.
Co-founder of crypto lender Nexo, Antoni Trenchev, said last week bitcoin could break $US50,000 ($72,062) in 2020. He thought the halving would be one reason, but another could be its perception as a safe haven. It needs to capture just 10 per cent of the gold market to achieve that.
“The initial idea was: We’re going to pay for coffees with bitcoin,” he said.
“But, obviously, that has failed to materialise. The narrative now that is much more persuasive is that bitcoin is the new gold.”
Trenchev pointed to bitcoin’s rally being on par with gold.
Bloomberg analyst Mike McGlone agrees, saying bitcoin’s “increasing global adoption as a digital version of gold” was a predominant trend.
But for ASX-listed crypto stocks, crypto prices have been the least of their worries. The bourse has been an horrific hunting ground for crypto stocks with the majority suspended and some facing delisting.
An early casualty was Chapmans (ASX:CHP) which left in the first quarter after various crypto investments failed.
The company had flagged a move to the smaller National Stock Exchange (ASX:NSX) but nothing has eventuated. A spokesperson for the NSX told Stockhead discussions took place but did not progress.
DigitalX (ASX:DCC) describes itself as a blockchain consultant, but crypto has been a significant part of its business.
In November it launched a bitcoin fund designed to make it easier for people to invest in the dominant cryptocurrency. It has never been suspended, but it did slide 39 per cent in 2019.
Byte Power Group (ASX:BPG) is facing delisting on January 31. The company told investors during the Christmas break that it planned to launch a new crypto exchange in Singapore on the last day of 2019.
In April, First Growth Funds (ASX:FGF) and YPB Group (ASX:YPB) both suffered suspension. The pair signed an MoU to create a new digital token but unfortunately caught the ASX’s attention after explicitly saying they had the bourse’s blessing to do so when they did not.
Although YPB was eventually reinstated, First Growth Funds gave up and voluntarily delisted. The company said it would move to a secondary Canadian market.
Mobecom (ASX:MBM) is another stock in the crypto space that has been suspended for several months. Prior to its suspension it made a handful of acquisitions including AirCrypto, a cyptocurrency exchange platform.
While discussions between it and the ASX have not been made public yet, the most recent news out of the company was the winding up of four subsidiaries on Christmas eve. Mobecom promised to break even on an earnings basis this year.
Iot Group (ASX:IOT) is another company that has been at loggerheads with the ASX for several months. While it has evidently paid its listing fees because it has not yet been delisted, nothing has been reported from the company since it was suspended for paying late.
The key difficulty crypto players and the ASX are struggling with is regulation.
Last August the ASX issued a compliance update regarding cryptocurrency-related activity.
“Cryptocurrency-related activities raise significant legal, regulatory and public policy issues and their regulatory status in a number of overseas jurisdictions remains subject to considerable uncertainty and rapid change”, the bourse said.
The ASX made several recommendations to firms, but the bottom line was crypto players needed to consult with the exchange.
“[The] ASX would strongly encourage listed entities proposing to pursue cryptocurrency-related activities to consult with ASX before they do so and, in particular, before they make any announcement to the market concerning such activities,” it said.
Among other recommendations, it said crypto companies had to prove their business was bona fide and legally compliant.
HopgoodGanim Lawyers partner Josh Hunt told clients at the time crypto aspirants had to be aware of the Listing Rules and how ASX would interpret them with respect to the industry.
While the guidance was five months ago, what is most significant in retrospect is what has happened since in the ASX crypto space, or rather what hasn’t happened.
Since then there has been little life out of any of these companies and no new ones seeking to list.
However, the ASX small caps with crypto as a side project have done well. One example is Fintech Chain (ASX:FTC), which operates a payment processing system that includes (but is not limited to) crypto currency payments.
It is now more than double its price a year ago, although much of this is due to its roll out in China where conventional cryptocurrency is banned notwithstanding that the government is working on its own kind of digital currency.
A number of others walked away from investments such as Change Financial (ASX:CCA), which owned 33 per cent of cryptocurrency IvyKoin. In January 2019 it sold its investment in the project claiming in its half-yearly report it gained a significant return.