FIRST BITCOIN CAP COM NPV (OTCMKTS:BITCF) is a runner this week in the micro cap space, with the company gaining close to 140% on Monday’s open price. Extend this out to a year to date comparison, and we’re looking at close to 600% gains.
What’s behind the run, and what’s to come? Let’s take a look.
First, it’s worth noting that this company is one of the only publicly traded bitcoin plays (it bills itself as the first, but that’s not really accurate) and this has brought with it a degree of collateral benefit as the bitcoin price has appreciated over the six months or so. Bitcoin is both at the same time a mature and a relatively immature asset, and there’s large swathes of the financial trading space (the majority, likely) that don’t know how, or don’t want, to buy bitcoin directly. The same people, however, want to pick up an exposure to the digital currency’s appreciation, and publicly traded bitcoin companies offer them a way to do this.
A couple of years back, companies like Overstock.com, Inc. (NASDAQ:OSTK) and BITCOIN SERVICES I COM USD0.001 (OTCMKTS:BTSC) were the beneficiaries of such. Now, it’s companies like First Bitcoin Capital and, to a degree, MGT Capital Investments Inc (OTCMKTS:MGTI).
This also works in the reverse, of course. The pending hard fork (and we’ll come to this shortly) has some exchanges telling bitcoin holders to cash out at the moment, and this is translating to a short term dip. Chances are, then, at least very near term, we’ll see a dip in this company.
But what about beyond this dip?
Well, First Bitcoin Capital is setting itself up as an all encompassing digital currency play. The company has three primary business arms – an exchange, a mining operation and a crypto news website – and controls said operations under the First Bitcoin Capital umbrella. For anyone looking to pick up an exposure that diversifies across these three key elements of the bitcoin and blockchain space, then, this could be a nice play.
With that said, we see the exchange as the major value driver here. The news site is nothing but a content aggregation domain built using a third party aggregation platform that costs $9 a month to maintain – there’s no value there. The exchange, on the other hand, looks interesting. It’s called CoinQX, and its just opened up some offices in Shanghai, as per this latest announcement. China is the place to be for a bitcoin company right now, and if the company can pick up a client base in the region, there’s plenty of growth opportunity to be taken advantage of.
There are, of course, a bunch of these exchanges out there already, so what sets this one apart?
Well, it’s offering what’s called XBU futures trading. There’s a bit debate ongoing in the bitcoin space right now as to whether a hard fork should be implemented. If it happens, bitcoin will essentially be split into two tradable assets, bitcoin and bitcoin unlimited. Right now, of course, there’s not been a fork, and bitcoin unlimited doesn’t exist. Through CoinQX, First Bitcoin Capital is offering a way to trade bitcoin unlimited before it exists. It’s a risky approach, as the fork might now happen, but it’s risk free from a trader’s perspective in the sense that the futures (XBU on the platform) are tradable for BTC, so even if the fork doesn’t happen, traders can just convert back to BTC and go on as normal.
In reality, this is a speculative move on First Bitcoin’s part, and one that for all intents and purposes is nothing more than a marketing ploy. That said, it’s a nice marketing ploy, and one that could create a lot of buzz at a time when the whole space is talking about the fork, and what impact it might have.
With offices opening in China, an exchange that’s going to grab headlines (if First Bitcoin’s PR department is worth its salt) without having to pay anything for the privilege and bitcoin looking set to continue gaining strength long term, this one might well be worth a speculative punt.
Cash is basically non existent, so dilution is a real concern, but it’s far from prohibitive if this one starts to gain traction against a backdrop of industry buzz.
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Disclosure: We have no position in BITCF and have not been compensated for this article.
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