Consider the 10 largest companies trading cryptocurrency or blockchain on the Toronto Stock Exchange or the TSX Venture Exchange. Over the past year, none have outperformed Bitcoin except for two.
Since last year, bitcoin is down about 40 percent so far. But Mogo Inc., the worst performer among these big Canadian-listed companies, is down 80 percent.
Then there are these big crypto companies that would probably be in the TSX top 10 but have performed so poorly that they’ve been dropped — like Voyager Digital Ltd., which is down 99 percent over the past year and one filed for bankruptcy.
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Such miserable performance by regulated, publicly traded companies is instructive. It shows that Bitcoin has proven itself to be a smarter choice for investors looking to gain exposure to the sector. Most crypto stocks are just not worth buying.
This contradicts the 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 using traditional investment platforms — tools that investors are familiar with. And they can be held in tax-deferred accounts.
Such stocks are also considered safer. A stake in a company is tantamount to equity and a stake in something tangible, as opposed to holding what appears to be Internet money. And it makes sense to buy a stake in the casino — an exchange platform like San Francisco-based Coinbase Global Inc. — rather than try your luck at the slots by buying crypto yourself.
But as we saw last week with the revelation that Coinbase is under investigation by the US Securities and Exchange Commission, a company’s stock can be even more volatile than Bitcoin — it can be affected by really specific factors that aren’t influencing the market as a whole.
Coinbase, which is as big and stable as any company you can get in the crypto space, fell 7 percent following news of its SEC investigation. Meanwhile, Bitcoin is down less than 1 percent, relatively flat on the day.
Of course, such company-specific problems also exist in traditional resource companies. Suncor Energy Inc., for example, has seen a string of worker deaths due to ongoing safety concerns, and analysts said this has caused its stock to rise at half the rate of some peers during the recent oil boom.
It’s just that crypto is a much younger and untried industry, full of loners who, on their best days, are only half as cautious as Suncor’s management.
Take the Vancouver company now known as Green Block Mining Corp. known and traded on the Canadian Securities Exchange. It got into trouble with the Alberta Utilities Commission last year for mining Bitcoin without telling anyone or obtaining the appropriate permits.
A name change and a year later, Green Block still can’t wash the stain off. Since peaking around $1.50 per share in February 2021, the stock has steadily fallen. It now trades at 5 cents with almost no correlation to bitcoin prices.
And while crypto companies are taking on the characteristics of commodity producers, they’re also mimicking the technology, as most companies — including all of the top 10 on the TSX — don’t pay dividends.
Crypto is also a very different world where traditional investing axioms are dying. Bitcoin, despite its reputation for volatility, is considered a boring bulwark in its own world compared to mainstream investing.
Unlike a corporation, or even other coins, Bitcoin is sufficiently decentralized that it is resistant to being impacted by a single factor – there is no CEO of Bitcoin who can make good or bad decisions that affect the price. Bitcoin is almost an index fund of sorts for the broader crypto world.
Almost every industry is currently in a downturn and a possible recession looms. Crypto-focused investors would have lost less money if they ignored all the fancy upstarts and just bought Bitcoin.
If the prospect of manipulating the asset with utterly irreversible transactions sounds daunting, there are always exchange-traded funds, like Purpose Investments’ Purpose Bitcoin ETF. None of them are perfect, but such funds more closely track Bitcoin’s price without the drama of a company. And investors can buy them on popular platforms and tax-deferred accounts.
Finally what two breakaways did Not perform worse than Bitcoin among the top 10 crypto blockchain companies listed in Canada? There’s only one that’s actually outperformed, VitalHub Corp., which is down 14 percent over the past year. The other, Datametrex AI Ltd., fell about as much as Bitcoin’s 40 percent drop.
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