Everyone’s talking up blockchain, so why are ASX crypto stocks in the dumps?
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In January the ASX’s 35-odd blockchain and cryptocurrency stocks had their Icarus moment as shares made steep gains in a matter of weeks before plummeting back to earth.
Some rose and fell with the bitcoin bubble and hype around other cryptocurrency launches or “Initial Coin Offerings” (ICOs). But others emphasied more “legitimate” uses of blockchain — the technology that underlies cryptocurrencies.
This year consultants like McKinsey have been talking up blockchain as a potential game-changer while Deloitte says 75 per cent of businesses are planning to use the technology.
But ASX investors don’t seem to be buying that.
Almost every ASX crypto-related stock has lost ground this year.
Since January 32 of the 35 small cap crypto stocks Stockhead monitors have gone backwards (see below).
The few stocks bucking the trend are: Animoca Brands (ASX:AB1) which recently started integrating crypto into its mobile games; 8Common (ASX:8CO) which got into the crypto game via a blockchain lobby group in February; and Fintech Chain (ASX:FTC) which began talking blockchain in March.
>> Scroll down for a table of ASX blockchain and crypto-focused stocks.
So why are ASX crypto stocks flailing when the global sector is moving ahead?
Heavyweight ASX tech investor Anton Uvarov says Australian investors were burned when the bubble in December around Bitcoin’s jaw-dropping surge to almost $US20,000 broke.
“The reason why [ASX crypto stocks] are down is because the hype is over and nobody really wants it now, while the crypto investors don’t want to buy ASX companies because they aren’t the same quality as what you can get [by investing directly] into the crypto space,” Dr Uvarov told Stockhead.
High quality crypto projects can raise money quickly and cheaply from ICOs and don’t need to bother with the bureaucracy and rules of a securities market.
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.
As Stockhead reported last week, ICOs are beginning to mature into an alternative to a stock market debut.
About 17 of the 35 companies on Stockhead’s list have actual crypto or blockchain projects, contracts, investments or revenue streams underway.
A rising tide lifts all boats
Apollo Capital’s Henrik Andersson believes a flow of positive news in the sector this year hasn’t been priced into crypto stocks.
He points to key milestones included the US Securities Exchange Commission declaring Bitcoin and Ethereum were not securities, and clarifications around regulation such as Malta’s move this week to became the “world’s first blockchain island”.
At the same time, however, poorly performing ICOs may be tarnishing the entire sector.
More than half of all crypto startups that raise money through token sales die within four months of their initial coin offerings, Bloomberg reported this week.
Sportscar dealer Bitcar had to reset its target from $US20 million to $SGD9 million ($27 million down to $9 million). The token is currently worth 1c.
Project Shivom, another ICO marketed in Australia, is down from a debut of 5c to 1c on Wednesday.
Two weeks after its debut, Ivy Koin reach a high of 25c before falling to 6c on Wednesday.
Generally, the broader cryptocurrency market is down about 70 per cent since early January.
The connection between bitcoin and crypto-focused stocks appears to be weighing heavily on the minds of investors.
On Wednesday evening Bitcoin was worth $US6,307.49, falling 67 per cent since it peaked in late December.
The share price performance of almost all of the crypto stocks, particularly those which are have functioning crypto or blockchain projects, have mirrored that.
Combined with tax-sales, it has meant that share prices for crypto stocks have trended gradually lower recently.
Here’s a table showing the performance of ASX blockchain and crypto stocks: