Yesterday's Bitcoin (BTCUSD) price increase had a similar effect on the prices of investment products associated with cryptocurrencies. Most of them were hit with a pleasant initial jolt in prices as news of the cryptocurrency's new price record price made its way to the markets. By the end of the day, some had shed their gains, but an overhang of celebration for Bitcoin's price jump remains in their price.
- Prices for investment products and stocks associated with cryptocurrencies increased in the aftermath of Bitcoin's record price.
- Stocks and funds with direct exposure to the cryptocurrency benefitted the most.
To be sure, Bitcoin price has been on an upswing for most of this year. After being the doldrums for most of 2019, the cryptocurrency has racked up gains of over 197% this year. The figure makes it the best-performing asset this year, even ahead of the S&P 500 Index.
But prices for companies and investment products associated with cryptocurrencies haven't always followed Bitcoin's trajectory. This is partly because they have varying degrees of exposure to cryptocurrencies. Companies that hold Bitcoin or are involved in mining the cryptocurrency benefitted from a surge of investor interest yesterday. Others, which are riding the Bitcoin and blockchain bandwagon, not so much.
Here are some stocks and investment products that witnessed an increase in prices due to the Bitcoin price jump.
Bitwise 10 Crypto Index Fund (BITW)
The recently introduced Bitwise 10 Crypto Index Fund (BITW) had a record opening last week. Bitcoin's price increase provided its shares with further momentum, and it surged by as much as 19% to $140 per share. It has retrenched slightly since then, but is still up by 18% from the day's start.
Bitwise claims that its fund is an easy way for investors to access Bitcoin. But the firm has also cautioned that the fund could trade at a significant and varying price premium to the actual asset. That warning is a much-needed disclaimer, considering volatility of crypto markets and changing demand patterns for crypto exposure by investment firms.
Interestingly, BITW competitor Grayscale Bitcoin Trust (GBTC), another bitcoin holding company that trades in OTC markets, did not fare as well and had a fairly steady run today. GBTC has a volatile price history. During the 2017 run-up in Bitcoin prices, GBTC shares traded for a premium of as much as 100% to the actual Bitcoin price at crypto exchanges. But the gains of today's price action accrued to BITW instead of GBTC.
Bitcoin Mining Companies
Hut 8 Mining Corp. (HUTMF), Marathon Patent Group, Inc. (MARA), and Canaan Inc. (CAN) are Bitcoin mining companies headquartered in Canada, the United States, and China, respectively. Bitcoin prices directly affect their operations because an increase in price generates demand for their mining machines and Bitcoin holdings.
During the crypto price bubble of 2017, Bitmain – the world's biggest miner – recorded profits of $952.6 billion on the back of increased demand for cryptocurrency mining machines. While the current rally is expected to produce similar demand for Bitcoin from institutional investors, it will not result in production of more Bitcoin since the cryptocurrency's quantity is halved every four years.
Canaan's share price jumped by as much as 15% in the morning before falling back. The Beijing-based company reported losses last quarter due to declining demand for its machines. Hut 8 Mining's price ended the day with an increase of 6% from the day's start. It also reported losses last quarter. Whether the price increase reverses the business prospects for both companies remains to be seen.
Marathon Patent's share price jumped by 7% after markets opened. By day's end, its gains were approximately 1.16%. The Nevada-based miner has already forecast upbeat revenue and profits in the coming quarters.
MicroStrategy Incorporated (MSTR)
MicroStrategy Incorporated (MSTR) is, perhaps, the most obvious stock to benefit from Bitcoin's rise. Its stock price began rising after close the previous day and, within 30 minutes of opening, was already up by approximately 8.5% from its previous close. It fell later but still ended the day 13.33% above its closing price from the previous day. The software company, which some analysts liken to a Bitcoin holding company, recently raised $650 million from the bond market to purchase Bitcoin as part of its treasury management strategy.