Blockchain v crypto stocks: how to pick which is which and why it’s important
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Blockchain and cryptocurrency stocks tend to get lumped together — the entire group of ASX-listed companies has plummeted together this year.
As our table below shows, only a handful of the 35 or so blockchain and crypto stocks have made ground since January.
But for tech investors with an eye on the longer term, experts say its important to understand who’s mining crypto and who’s building blockchain products.
Some experts say it’s all about the stocks that are focused on applying blockchain — the underlying technology that secures cryptocurrency transactions — to mainstream business applications.
It’s true all stocks in this space have been dragged down by Bitcoin’s descent from the overhyped highs it reached in December 2017.
Though there are signs that might be changing. This week the price of Bitcoin jumped 10 per cent.
Here’s a table showing which ASX stocks are more on the blockchain side and which are more on the crypto side:
What’s the difference between blockchain and crypto?
Blockchain is the underlying technology — the so-called “distributed ledger” which provides a public, encrypted record of transactions. It’s best known as the basis of cryptocurrencies such as bitcoin. But it has many other potential applications such as enforcing digital contracts or securing public records.
Companies like Yojee (ASX:YOJ) and Hastings Technology Metals (ASX:HAS) are building products using blockchain.
In their case, both are developing logistics tracking systems — one for drivers and their cargos, and the other for the pricey rare earths they’re producing in Western Australia.
Cryptocurrency are tokens such as Bitcoin or Ether that are built on top of blockchains.
Companies such as IOT Group (ASX:IOT) and DigitalX (ASX:DCC) are more focused on this side — looking to grow fat off ‘mining’ or helping other companies to mine cryptocurrencies, or launching Initial Coin Offers (ICOs).
Mining refers to the process where computers solve the mathematical puzzles that form the basis of blockchains, and are rewarded with tokens for every block they build. An ICO is like an initial public offering — but instead of offering shares, an issuer offers digital tokens that can be traded on cryptocurrency platforms or swapped for services.
Making an actual product out of the blockchain
Thirteen of the 35 ASX small caps that Stockhead monitors in this sector are actively building, or have invested in companies that are building blockchain-based products.
They include Animoca Brands’ (ASX:AB1) exceptionally successful blockchain-based game Cryptokitties, and Ookami’s (ASX:OOK) investment in identity-management business Brontech.
Change Financial (ASX:CCA), Kyckr (ASX:KYK), Novatti (ASX:NOV), 8Common (8CO) and Fintech Chain (ASX:FTC) are all in the know-your-customer or payments space.
The former also launched a cryptocurrency, which is currently down 46 per cent on its opening price.
Pureprofile (ASX:PPL) partnered with Brontech while Dawine (ASX:DW8) is another going down the logistics route for its wine business.
iCandy (ASX:ICI) is building blockchain games and is also unofficially behind a gaming crypto exchange, and Reffind (ASX:RFN) bought into major US loyalty play, Loyyal.
Work in progress
Five announced blockchain projects at the height of the craze in December but do not appear to have progressed past early stages.
Linius Technologies (ASX:LNU) said it had delivered on a blockchain video streaming design and strategy, but has not mentioned it since.
It’s the same with Sportshero (ASX:SHO): a big announcement dropped in December about building a cryptocurrency, but not a whisper after.
Shareroot (ASX:SRO) wants to become a blockchain-powered user-generated content licensing platform, but again, doesn’t appear to have progressed it.
Tianmei Beverage (ASX:TB8) said they wanted to make blockchain water in January. But they have since been suspended from the ASX for not lodging an annual report.
Genetic Technologies (ASX:GTG) has not yet secured a deal to match its aspirations to be a medical data blockchain company.
Cashing in on crypto
There are eight companies which are either introducers and promoters, such as DigitalX, wannabe owners of crypto mining operations like IOT, or launching their own currency like Mobecom (ASX:MBM) with its Airbux tokens.
Flailing exchange builder Byte Power Group (ASX:BPG) is still trying to get its project out the door, while Chapmans (ASX:CHP) has a stake in an offshore crypto mining operation.
Fatfish Internet (ASX:FFG) and First Growth Funds (ASX:FGF) are both investors with a number of currency businesses in their portfolios.
And YPB Group (ASX:YPB) announced in April it’s working on a token sale.
Trading on the rumour
Then there are those which are trading on the promise or rumour of the fact that they may one day get into the sector.
Transcendence (ASX:TTL), Alchemia (ASX:ACL), Manalto (ASX:MTL), Zyber (ASX:ZYB), and Property Connect (ASX:PCH) are not operating in the sector, no matter what investors may say.
Neither are fintechs Peppermint Solutions (ASX:PIL) and Transaction Solutions International (ASX:TSI), and Serpentine’s connection is that it’s owed $4.4 million by the owner of its former assets — which are now a blockchain play.