Consider the 10 biggest companies on the Toronto Stock Exchange or TSX Venture Exchange that deal in cryptocurrency or blockchain. Over the past year, with the exception of two, none has performed better than bitcoin.
From last year this time until now, bitcoin has fallen about 40 per cent. But Mogo Inc., the worst performer among those big Canadian-listed companies, has fallen 80 per cent.
Then there are those big crypto companies that probably would be in the TSX top 10 but have done so badly that they’ve been taken out of it – like Voyager Digital Ltd., which has fallen 99 per cent over the past year and filed for bankruptcy.
Such abysmal performance by those regulated, publicly traded companies is revealing. It shows that, for investors who want to get exposure to the sector, bitcoin itself has turned out to be the wiser choice. Most crypto stocks are simply not worth buying.
That does go against conventional wisdom. Crypto stocks go up and down with bitcoin, like a gold miner and gold prices. But, unlike bitcoin, such stocks can be bought with traditional investment platforms – tools that investors are familiar with. And they can be held in tax-advantaged accounts.
Such stocks are also considered safer. A share in a company equals equity and a stake in something tangible, versus holding make-believe internet money. And it makes sense to buy a stake in the casino – an exchange platform like San Francisco’s Coinbase Global Inc., for example – versus trying your luck at the slot machines by buying crypto yourself.
But as we saw this past week with the revelation that Coinbase was under investigation by the U.S. Securities and Exchange Commission, a company’s stock can be even more volatile than bitcoin – it can be affected by really specific factors that don’t have an impact on the market as a whole.
Coinbase, which is as big and stable as a company you can get in the crypto space, fell by 7 per cent on the news of its SEC investigation. Meanwhile, bitcoin was down by less than 1 per cent, relatively flat on the day.
Such company-specific issues, to be sure, are present in traditional commodities-based companies as well. Suncor Energy Inc., for example, has had a string of worker fatalities owing to persistent safety issues, and analysts have said that has resulted in its stock rising only half as much as some rivals in the recent oil boom.
It’s just that crypto is a much younger and untested industry, full of maverick-like players who on their best days are only half as cautious as the management at Suncor.
Take the Vancouver company now know as Green Block Mining Corp., traded on the Canadian Securities Exchange. It had gotten into trouble last year with the Alberta Utilities Commission for mining bitcoin without telling anyone or getting the appropriate permissions.
A name change and a year later, Green Block still can’t wash off the stain. From its peak around $1.50 a share in February, 2021, the stock has been on a steady drop. It’s now trading at 5 cents, with almost no correlation to bitcoin prices.
And crypto companies, while taking on the characteristics of commodities producers, also emulate tech in that most firms – including all of the Top 10 on the TSX – pay no dividends.
Crypto is also a whole different world, where traditional investment axioms go to die. Bitcoin, for all its reputation of volatility compared with more mainstream investments, is considered a boring bulwark in its own world.
Unlike a company or even other coins, bitcoin is sufficiently decentralized that it is resistant to impacts by any single factor – there is no chief executive of bitcoin that can make good or bad decisions that will affect the price. Bitcoin is almost a sort of index fund for the wider crypto world.
There’s currently a downturn in nearly every industry, with a potential recession looming. Crypto-focused investors would have lost less money if they had disregarded all the fancy upstart companies and just bought bitcoin.
If the prospect of handling the asset with absolutely irreversible transactions sounds daunting, there are always exchange-traded funds, like the Purpose Bitcoin ETF from Purpose Investments. None of them is perfect, but such funds do track the price of bitcoin more closely, without the drama of a company. And investors can buy them on familiar platforms and in tax-advantaged accounts.
Finally, which two outliers did not perform worse than bitcoin among the Canadian-listed Top 10 crypto-blockchain companies? There’s only one that actually did better, VitalHub Corp., which fell 14 per cent over the past year. The other, Datametrex AI Ltd., fell about the same as bitcoin’s 40 per cent.
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