Penny Stock Firms Cash in on Bitcoin's Rise

Bitcoin, which like other cryptocurrencies struggled to survive after last year's crash, is winning the crypto wars as its market share surges and penny stock operators flood in to trade the world’s largest digital currency by market capitalization. Bitcoin’s market share as a percentage of the entire crypto universe has risen to 60%, up from 53% at the start of this year, as its value has more than doubled, according to data provider, as cited by Bloomberg.

Penny Stock Shares Outperform as Broader Market Lags on Trade Fears

Meanwhile, penny stock operators have jumped on the opportunity to resume crypto mining operations. MGT Capital Investments Inc., whose stock goes for under $0.10 cents a piece, announced that it would resume Bitcoin mining operations. The company highlighted the digital currency’s near two-week rally in which it has broken past $8,000. MGT stock jumped 15% on Tuesday, bringing its market value to $16.2 million, compared to its high at $350 million during the peak of the crypto-craze in 2017. On Wednesday, its market cap fell again to $14.1 million.

In light of Bitcoin’s stellar roughly two-week climb, in which it has surged roughly 60%, it is likely that other penny stocks will re-incorporate “Bitcoin” into press releases, noted Bloomberg. This decision is now even more compelling as the U.S. equity markets face a new wave of volatility and downward pressure from revived U.S.-trade wars.

Other popular crypto-focused companies have seen their shares outperform amid bitcoin’s comeback. Shares of Riot Blockchain Inc. (RIOT), Marathon Patent Group Inc. (MARA), and Grayscale Bitcoin Trust BTC were all trading higher than the broader market on Tuesday, on track to extend their own recoveries.

Bitcoin Outperforms Peers

While Bitcoin’s revival has lifted the prices of competing coins, none have reached the same level of performance this month. Additionally, Bitcoin fared better than its rivals last year. While the largest digital coin declined 74% in 2018 after reaching a high near $20,000 in December 2017, many coins plummeted as much as 95%, as noted by Bloomberg.

"Bitcoin’s recent dominance amidst bullish conditions is quite interesting since in traditional asset classes we typically see a flight-to-quality amidst bearish conditions," wrote Josh Gnaizda, chief executive officer of Crypto Fund Research in San Francisco, in an email to Bloomberg. “That Bitcoin, which is clearly the quality asset in the space, has outperformed in this recent rally is likely the result of it not only breaching the psychologically important $6,000 level, but also some significant institutional and/or sovereign buying. These buyers would be expected to invest disproportionately in the most established and vetted asset – and that asset is clearly Bitcoin."

Sid Shekhar, co-founder of tracker TokenAnalyst, indicates that some investors have decided to dump their holdings in other digital assets to avoid missing out on the bitcoin rally. He notes that coins such as Bitcoin SV and IOTA are actually down YTD.

Bitcoin’s rising popularity can be attributed to its growing adoption by many major institutions. To name a few, financial behemoths Fidelity Investments and E*Trade Financial Corp. (ETFC) have announced plans to expand their crypto operations, Facebook Inc. (FB) is developing a crypto-based system, and mainstream consumer-facing companies like eBay Inc. (EBAY) and Inc.’s (AMZN) Whole Foods Market will soon accept payment in the form of digital currency. Most recently, Bakkt, a venture backed by the owner of the New York Stock Exchange, said it plans to begin testing its own futures by this summer.

Looking Ahead

Cryptocurrency bulls view the recent revival in the once red-hot market as a sign that the crypto winter is over for good. While a wave of bad news, including a scandal involving major exchange Bitfinex, has the bears cautioning, Bitcoin enthusiasts view the lack of negative reactions in the market as a sign that the crypto spring is here to stay.

"This is what happens when all of the good news is ignored for a full year and gets bottled up," wrote Jeff Dorman, chief investment officer at Arca, in a research note cited by Bloomberg. "We’re now in a period where all of the bad news is largely ignored and brushed off."

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