Bitcoin has had an amazing year in many respects, including skyrocketing valuation, growing in institutional finance acceptance, and further recognition among retail investors. It has brought a booming altcoin market along for the ride, with some coins surprisingly achieving more astounding gains relative to their larger peer.
This phenomenon is not unique, because every time bitcoin has a bullish year, the cryptocurrency industry goes on a tear as well. What’s new in 2017 is the degree to which the broader economy has adopted bitcoin instead of watching others cash in from the sidelines. Chief among them is Overstock.com (OSTK), an ecommerce retailer with enormous gravity, and one that has profited enormously from bitcoin’s ascent.
Overstock the Trendsetter
Overstock can claim to have adopted bitcoin long before any of those who are just now dipping their toes into the water. January 2014 saw CEO Patrick Byrne announce that his company would be the first major online retailer to accept bitcoin, in what is now considered the coin’s relative infancy. This was a significant event for the cryptocurrency community, who were shown tangible proof of bitcoin’s fungibility and use as a currency, during times when this very idea came into question.
One of the biggest arguments against bitcoin was (and still is) its speed, or lack thereof. However, time has shown that people don’t seem to care about transaction times if bitcoin can continue to gain value relative to fiat money, as their returns can outmatch any future fees by 10 to 1.
Fungibility is important as well, however, and Overstock was one of the first places where people could spend their bitcoin directly on what they’d otherwise buy with credit cards or Paypal. The company took an enormous risk, but in the first two months, processed over $1 million in transactions paid for with bitcoin.
Now, bitcoin’s record year has left a strong impression on the price of Overstock shares, which have ascended by more than 300%. These results have inspired others to hop aboard the bitcoin train during one of its most volatile years ever.
However, Overstock’s 2014 announcement came during a rocky time for bitcoin as well. Though it happened at the cusp of a multi-year bitcoin bear market, the company did not falter, and four years later they have been more than redeemed for their early adoption. This example of risk and reward has inspired more new entrants into the cryptocurrency market than ever before.
Jumping on the Bandwagon
Though Overstock has undoubtedly profited immensely from its 50% hold strategy with bitcoin, it cannot be argued that the company has benefited in equity markets as well. Other companies are increasingly looking to emulate this dual success and go about it in several ways.
There are entities which simply changed the name of their company to include the word ‘blockchain’, leading to brief but spectacular results, those which announce partnerships with altcoins or new acquisitions to manipulate prices, and others which incorporate the new technology in more healthy, sustainable ways. (See also: Long Island Iced Tea Soars 280% After Renaming Itself Long Blockchain.)
Running an initial coin offering (ICO), helps companies with a unique value proposition to capitalize on it. These firms also enter the cryptocurrency market at the same time, thereby hitching their wagon to its star much as Overstock did.
Sharpe Capital is realizing similar ambitions with its own coin offering, raising money to support a new kind of fund that runs on market fundamentals and crowdsourced sentiment as well. The company adds a social component into an otherwise technical cryptocurrency market, allowing participants to predict the price of certain crypto assets, and receive Ether based on their accuracy and current holdings. Sharpe uses artificial neural networking and natural language processing to consider participant sentiment alongside more technical indicators, hoping to become a more reactive, profitable crypto fund in an industry largely driven by emotion.
Doubling down on its past achievements, Overstock itself is currently running an ICO as well, in which the company is attempting to raise an additional $250 million to fund some game-changing projects. The event and its purpose alike will tie Overstock closer to cryptocurrency, which is an encouraging sign for businesses on the fence of deciding whether to jump in or not.
Tied to Bitcoin: Is It Good or Bad?
With history as our guide, bitcoin could have another tumultuous year ahead, so these decisions should not be taken lightly. Those like Overstock which choose to hold a portion of the cryptocurrencies they take as payment alongside companies where ICO tokens are their main source of fundraising efforts, are exposed to a market that takes wild daily swings in either direction.
Regardless, companies like Overstock have proven themselves capable of identifying potentially lucrative trends and capitalizing on them, and their successes through bad times and good can be used as a model for others, who are just now exploring the possibility of embracing bitcoin. Companies that enter should be prepared for a crazy ride, but if Overstock is any indication, the sooner the better.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein.