Cryptocurrency value expands as BlackRock and Coinbase look to monetise blockchain technology

The cryptocurrency market has picked up a jolt of appreciation over the past few days with various factors cited for spurring the leading benchmark for cryptocurrencies, Bitcoin, beyond US$7,425 per coin.

This is still some way off Bitcoin’s historic high at almost $US20,000 per coin set in December last year, although the recent price spike relates to growing industry development with the inclusion of trillion-dollar asset management giant BlackRock and current crypto exchange Coinbase.

According to CoinMarketCap, the value of the crypto market has risen by 11% in the last 24 hours thereby pushing Bitcoin’s ultimate market cap to US$127.3 billion.

A significant catalyst behind the rising tide in cryptocurrencies has been revelations that asset management powerhouse and ETF giant BlackRock is potentially hatching plans to launch a crypto ETF in the near future.

And it’s not just Bitcoin that’s picked up a strong gust of appreciation.

Other cryptocurrencies such as Ethereum and Ripple, the second- and third-largest after Bitcoin, are also up 6% and 9% over the past day with bullish sentiment seen across 98 of the top 100 cryptocurrencies tracked by CoinMarketCap.

Largest gains were for Ardor coin which was up 46% and valued at US$236 million by market capitalisation.

Impact on ASX stocks

Amongst ASX stocks, several companies have benefited from the US-led crypto spike.

DigitalX (ASX: DCC) and Ookami (ASX: OOK) are up around 50% for the week, having clear blockchain-related business models that could well benefit if crypto-assets are in fact commoditised and traded like established securities such as equities and bonds.

Yojee (ASX: YOJ), who utilises blockchain technology in its services, signed a major two-year agreement with established logistics company Riverwood Logistics and raised A$8 million earlier this week, which has only heightened expectations and investor sentiment currently enveloping blockchain technology companies.

As a sure sign of growing cryptocurrency influence, DigitalX said that over the previous 12 months, it has seen its share price “track the rises and falls of the cryptocurrency markets, in particular, the global Bitcoin market.”

Elsewhere in the crypto-blockchain space, Fatfish Internet Group (ASX: FFG) shares have risen 23% over the past week, partially helped by blockchain and crypto landscape evolution, but also helped by news of its intention to further invest in Epsilon Capital Management, a technology fund management business based in London, UK. The “share subscription” deal means a Fatfish representative will join Epsilon Capital’s board of directors.

Fatfish has said the move is aimed to combine the blockchain and cryptocurrency experience of Fatfish with the global expertise of Epsilon Capital co-founders in corporate finance, fund management, investment banking and capital markets.

Canada-based and now dual listed Zyber Holdings (ASX: ZYB) is up around 17% this week with cybersecurity also receiving a strong bid on the back of the crypto-powered market theme. Zyber is buoyant after its listing on the Frankfurt Stock Exchange in Germany in March – clearly enjoying the rising tide for crypto-blockchain companies on the ASX.

BlackRock going crypto?

Earlier this week, Financial News and Bloomberg claimed that BlackRock had established a working group to “look into cryptocurrencies and blockchain infrastructure”, with a potential crypto move neither denied or confirmed.

BlackRock is a US-based investment management company first founded in 1988, but one that has amassed a portfolio of US$6.3 trillion in managed assets spread across various asset classes. The firm operates as a risk management and fixed income institutional asset manager but has been dubbed a “shadow bank” by The Economist in a special report back in 2014.

The so-called shadow banking sector is considered to be the group of companies that provide financial services (other than banks). The entire sector ranging from short-term loan lenders to multinational asset management has been treated with suspicion, and some hedge fund managers would even say disdain, by some regulators since the financial crisis a decade ago.

The UK’s Financial Stability Board published a report earlier this year saying that its narrow measure of shadow banking activities could “pose a threat to stability” and rose 7.6% to $45.2 trillion in 2016. A broader measure, which includes all financial firms that are not central banks, banks, pension funds or insurers is around $99 trillion and represents 30% of global financial assets.

The report stated that the US accounted for 31% of the risk, followed by China with 16%, the Cayman Islands at 10% and Japan at 6%.

Whereas some would argue that non-bank financing provides a valuable alternative to bank financing and helps support real economic activity, shadow finance critics claim that it represents an asymmetric mark risk that is presided over by always unaccountable and often anonymous business managers.

According to BlackRock chairman and CEO Larry Fink, BlackRock has not sought any “crypto exposure” on behalf of its clients but has had a crypto “working group” since 2015 that meets periodically to exchange information on blockchain-related developments including potential new ventures.

Coinbase brokerage

Bitcoin values were further boosted by supplementary news that Coinbase, a leading cryptocurrency exchange, is moving forward with becoming a fully-fledged crypto broker-dealer (a highly sought-after status in modern financial markets).

Coinbase says it has been given approval from the Financial Industry Regulatory Authority to move forward with a trio of acquisitions that could allow it to become one of the first federally regulated venues for trading digital coins.

If granted, the status would effectively classify crypto digital assets as marketable securities thereby giving them greater market influence and potentially affecting entire swathes of modern markets – starting with the financial system and by what means ‘value’ is priced.

FIRA approved Coinbase’s purchase of Keystone Capital, Venovate Marketplace and Digital Wealth LLC, with the set of acquisitions positioning Coinbase to offer so-called “security tokens”.

However, the counter-effect is that offering investable securities brings more federal oversight – a prospect most government legislators are not ready for just yet, given the swift emergence of blockchain technology.

As is normally the case, new technology attracts plenty of ground-breaking ideas and productive opportunities – but – tends to leave regulators lagging behind while established government policy remains in the lurch how best to respond.

Blockchain technology

Bitcoin and Ethereum are cryptocurrencies that can have become increasingly popular over the past few years, serving as a digital means of exchange between people from around the world.

Their entire existence and operational premise are based on blockchain technology and more technically: distributed ledger technology (DLT). Blockchain can facilitate incredibly large databases, faster operating times, sharper cybersecurity, but also, deliver pristine transparency and usability to users.

The rapid spread of crypto-powered efficiencies has also gradually attracted various users from both consumer and commercial angles, in areas of computing, software, digital payments, logistics and cybersecurity. The benefits of blockchain technology include cryptocurrencies but they don’t end there.

There are potential advantages to entire systems, primarily public and large-scale administrative functions that can allow rapid business development and “upscalability” for small businesses, including software as a service company REFIND (ASX: RFN), which snapped up a 15% stake in blockchain-based loyalty and rewards company Loyyal Corporation.

The demand and supply dynamics for Bitcoins is to some extent pre-destined to be engulfed in a perpetual up-trend – given the mathematically-limited amount of supply being met with a brand-driven (and ultimately unknown) level of demand, that has been buoyed by speculation, as much as it has for technical or functional reasons.

However, blockchain technology is not only about cryptocurrencies or Bitcoin value with several companies including large asset managers and online crypto exchanges edging closer to taking cryptocurrencies unavoidably mainstream.