Crypto assets are back on the radar, and ASX blockchain stocks are responding
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It’s been an interesting couple of months for small-cap ASX investors who still keep one eye on the crypto markets.
On February 6, BTC prices closed at $US3,406.40 on Binance — the world’s largest exchange by volume — and as recently as March 26, it was still trading below the $US4,000 mark.
(More on the Binance hack that saw it lose $40 million in BTC further down.)
Now it’s back above $US6,000; well below the $US19,000-plus from the halcyon days of late-2017 but up more than 90 per cent from December lows. In addition, industry players remain convinced that institutional money is still primed to move into the space.
And as it happens, there’s also been some material gains in the colourful world of ASX blockchain stocks.
Stockhead tracks a group of over 30 listed companies that either have blockchain-based products or indicate they have some kind of connection to the technology.
In line with Bitcoin’s decline, stocks in the sector posted an average annual loss in excess of 50 per cent over 12 months to the middle of March.
But over the past month, it’s been a different story; that sea of red has been converted to an average gain of 18 per cent.
Here are the latest moves:
Of the 32 companies on the list, there were 16 in positive territory while 13 lost ground and three were unchanged.
And the average monthly return was given a boost by two outsized gains; Fintech Chain Ltd (ASX: FTC), which rocketed 353 per cent higher, and 8Common Ltd (ASC: 8CO) which is up 187 per cent. Take those out, and the average gain falls to just two per cent.
In addition, the link between crypto and most ASX blockchain companies is either non-existent, or tenuous at best.
But the numbers don’t lie; some heat is back in blockchain and fintech, so some of the larger moves may warrant monitoring.
FTC’s stock has gone on a tear, after a series of announcements in April concerning commercial deals for its T-Linx payments platform with various Chinese banks.
The company says T-Linx generates revenue by facilitating transactions between point-of-sale purchases and individual banks. Its 4C filing showed cash receipts in the March quarter of 3.2 million renminbi, but operating outflows total 4.97 million renminbi due largely to staffing costs.
In addition, the company had just 2,289,129 renminbi in the bank at the end of the quarter — an indication it will need to cut back on costs in Q2.
One company that does have a direct link to movements in crypto assets is blockchain advisory company Digital X (ASX: DCC).
DCC’s audited accounts show that it has a material amount of Bitcoin and other cryptocurrencies held on its balance sheet, which in some ways makes it a proxy trade for price moves in digital assets.
However, the recent price action in Digital X has been more volatile than Bitcoin itself.
Shares in the company rose from less than 5 cents in March to close above 8 cents in early April. But while Bitcoin has continued to climb, DCC has lost ground to fall back below 6 cents.
The company announced this week that it has settled legal proceedings in a consumer protection lawsuit brought against it, regarding the provision of financial advice in connection with an initial coin offering.
Digital X advised that it will make a cash payment of $250,000 to the claimants, followed by another $150,000 (plus interest) by July 1.
In keeping with the view that crypto remains a more desirable asset class for investors with a higher risk (and reward) profile, the market got a shakeup yesterday after a hack on the Binance exchange.
The hackers made off with around 7,000 BTC owned by Binance users, valued at around $US40 million. The exchange immediately went into damage control, shutting down new deposits and announcing that it will cover the funds lost.
While $US40m is a material expense, the exchange is likely to have some cash on hand — its profits for the 2018 year were reported to have exceeded $US400m.
(Although, given Binance is registered in the tax-haven jurisdiction of Malta, those figures are likely to be unaudited.)
Speaking with Stockhead, a crypto investor who trades on Binance said most of the action went down early yesterday morning.
“A bit before 8am (eastern time), some comments started coming through that people were withdrawing their funds, or ‘sell BTC it’s about to crash’. But the prices kept going up for a while,” they said.
“At around 7:50, it was up at $US5,892 and then by about 9am we had a massive red candle, with a 3.8% loss.”
Over the course of the day though, prices remained relatively resilient and by close of business BTC had recouped its losses.
The trader said in the scheme of things, the theft of 7,000 BTC is a much smaller loss than the famous Mt Gox hack in 2014. However, they said the cancellation of deposits and withdrawals could have a material short-term effect on the market.
“It’s a pretty big deal because it means the whales can’t do anything either.”
“So we can trade, we can all buy and sell but no one can move funds around, and whales can’t chuck a big amount of Bitcoin from cold storage onto an exchange — they just have to roll with what they’ve got.”