Stocks that surged in recent weeks because of the cryptocurrency mania
have managed to hold onto most of their gains despite the recent retreat
in the price of bitcoin and scepticism from market participants. FILE
PHOTO | NMG
Summary
- A Reuters analysis of 17 stocks of companies that have made blockchain or cryptocurrency announcements showed an average gain of 224 per cent through Thursday’s close from they released those statements.
- For example, shares of Long Island Iced Tea Corp jumped nearly 300 per cent on Thursday after the beverage maker said it would rename itself Long Blockchain Corp to reflect a new focus on blockchain technology.
- The moves are reminiscent of the tech boom, when the market value of companies such as Zapata and Books-A-Million rose sharply after they announced an internet business or an updated website.
Stocks that surged in recent weeks because of the cryptocurrency
mania have managed to hold onto most of their gains despite the recent
retreat in the price of bitcoin and scepticism from market participants.
A
Reuters analysis of 17 stocks of companies that have made blockchain or
cryptocurrency announcements showed an average gain of 224 percent
through Thursday’s close from they released those statements.
For
example, shares of Long Island Iced Tea Corp jumped nearly 300 per cent
on Thursday after the beverage maker said it would rename itself Long
Blockchain Corp to reflect a new focus on blockchain technology.
The
moves are reminiscent of the tech boom, when the market value of
companies such as Zapata and Books-A-Million rose sharply after they
announced an internet business or an updated website. After the dot-com
bubble burst, many of the companies went out of business or became much
less valuable.
“There’s
been a continued surge of crypto headlines,” said Michael Antonelli,
managing director at Robert W. Baird in Milwaukee. “It’s gotten more
worrisome as more companies have changed their names. It’s the kind of
stuff you saw back in the dot-com era.”
Many of the
crypto stocks came under pressure on Friday, as the price of bitcoin
tumbled below $12,000 to put it on track for its worst week since 2013.
Riot Blockchain dropped 15.3 per cent to $23.36, and Overstock.com,
which announced in August that it would accept major alt-coins as
payment, was down 6.5 percent at $63.05.
Even with the declines on Friday, bitcoin itself is still more
than double from its price at the start of November while the stocks are
still well above their prices before the companies made cryptocurrency
announcements.
While the stocks are susceptible to
price moves in bitcoin itself, analysts caution investors should make
sure the company has a credible business model.
“It is a buyer beware time,” said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.
“Long
term it may hurt these companies because if bitcoin does settle down to
being a product that trades like most products and doesn’t have crazy
moves every day, it is going to make people look at these companies and
ask what is really going on here.”
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