Bitcoin’s price has been surging in price since last April. After 18 terrible months, BTC gained USD 1.000,00 in a single hour on April 2nd. It’s kept growing up in value since then, and it’s been testing the USD 11.000,00 level for several days already.
Because of Bitcoin’s importance in the cryptocurrency market, the rest of the coins usually follow BTC’s performance. So the whole market tends to be trading in green numbers when BTC is doing well and vice versa. There’s nothing new about that.
Today, however, we’re seeing a different phenomenon. Bitcoin’s recent progress has also moved the traditional stock market. The Asian one to be precise, especially for stocks in companies that work in blockchain technology, distributed ledger technologies, and cryptocurrencies.
It’s only natural for a higher capitalization in the cryptocurrency market to make blockchain companies more valuable. This shouldn’t come as a surprise for anybody. And yet, this is not something we see very frequently. It’s probably the first time in history in which the correlation becomes so evident. It’s one day only, but it’s worth noticing.
Let’s delve into the details
In Tokyo, GMO Internet Inc went up by 7%, reaching its highest level in nine months. Metaps Inc. gained 11%; Remixpoint Inc. expanded 6.2%; Ceres grew by 4.4%.
Things went green in Seoul as well where Vidente Co. and Woori Technology Investment Co. advanced by 5.4% and 4.6%, respectively.
“Bitcoin resurgence should be a definite reason behind these gains,” according to Supun Walpola, an analyst for LightStream research.
“Going long on stocks that have exposure to cryptocurrency is something that we have seen in the past during a Bitcoin/cryptocurrency bull run — especially with those who want to avoid the volatility of crypto but at the same time want to have some exposure into these markets.”
Mr. Walpola also explained that the effect that growth in cryptocurrencies can affect over traditional companies could differ broadly depending on the particular firm. Larger firms benefit less than smaller ones like you can see in the cases of GMO and Remixpoint. “But something that we have seen in the past is that the stock prices tend to increase more than the actual benefit that these companies would get during a crypto surge, which has always resulted in immediate corrections,” the expert added in an email.
GMO is going back to mining
GMO offers a broad collection of web-based services as well as investment in some selected subsidiaries. The company has also mined Bitcoin in the past. In a report from May 16th, an officer informed that “GMO will be putting more focus back on its Bitcoin mining business again,” after relocating its mining hardware to a place with cheaper costs. While more competitive costs are excellent for sure, this obviously has everything to do with BTC’s current high price. GMO’s shares have increased by 34% since the year started.
The question in everybody’s mind is, of course, how long is the current BTC rally going to last?
“We have seen from past experiences that any success on this front is short-lived,” Walpola wrote. Investors prefer to buy stocks instead of cryptocurrencies as a strategy to avoid volatility and risk, but “such strategies have often gone wrong when crypto markets turn red — which could happen just about at any time.”
Editor’s note: The post was edited on Jul 01, 2019, to give Bloomberg credit in the sub-title too on their request.
Disclaimer: The presented information is subjected to market condition and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.