Bitcoin Proxy Stocks Fall Amid Cryptocurrency Selloff
Zacks Investment Research | Jan 16, 2018 05:24AM ET
Shares of several popular blockchain and bitcoin proxy stocks—including Riot Blockchain (NASDAQ:RIOT) , LongFin Corp. (NASDAQ:LFIN) , and the Bitcoin Investment Trust (OTC:GBTC) —fell sharply on Tuesday amid a massive selloff that wiped billions off of the global cryptocurrency market.
The price of both bitcoin and Litecoin have tumbled more than 18% within that timeframe, while Bitcoin Cash and Ethereum have plummeted more than 20%. Ripple, a budding altcoin that has surged to become the third-largest crypto in recent weeks, has crashed over 30%.
According to As Bitcoin Plummets, Here Are 3 Cryptos Gaining Today ).
While widespread crashes throughout the cryptocurrency market cannot be pegged to one particular reason, it does seem that many traders are concerned about the possibility of significant regulatory changes in several key Asian markets.
In China, reports have indicated that regulators are gearing up to crack down on the country’s bitcoin mining operations. While the exact size and location of many mining operations remains a mystery, China is thought to be home to the majority of the world’s miners.
What’s worse, Chinese officials are reportedly working to further restrict domestic internet users from accessing international cryptocurrency exchanges. China actually banned online crypto exchanges last year, but regulators are apparently noticing an uptick in activity at alternative exchanges that offer centralized trading. According to recent report from Bloomberg, these exchanges will soon be barred as well.
Meanwhile, the cryptocurrency market has grown increasingly worried about South Korea’s intentions to regulate trading. South Korean officials have walked back the justice minister’s recent claim that the country is working on an outright ban on cryptocurrency exchanges, but the government has confirmed that it is considered a number of proposals to curb speculative trading.
For trendy stocks like Riot, Longfin, and GBTC, volatility in the crypto market causes volatility in their own valuations.
Riot closed more than 16% lower on Tuesday and is now down about 26% over the past five days. The small-cap stock emerged as a popular cryptocurrency proxy stock after shifting to a blockchain-focused business model several months ago. Formerly, Riot was a dying biotech diagnostics equipment firm.
Shares of Longfin closed about 8.5% lower today. Longfin exploded in December after acquiring Ziddu.com, a blockchain research company working on decentralized solutions for lending and financing.
The Bitcoin Investment Trust, which operates as a bitcoin holding fund and once regularly traded at a 100% premium to its bitcoin-per-share value, closed nearly 12% lower on Tuesday. Last week, GBTC popped on the news that the fund would soon undergo a 91-to-1 stock split geared towards making the holding company more accessible to individual investors.
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Experienced cryptocurrency traders—and those who have tested the waters by day trading stocks like RIOT, LFIN, and GBTC—likely will not lose much sleep over Tuesday’s crash. But for those on the outside looking in, the latest volatility in the cryptocurrency market underscores their worst fears.
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