Jumping on the 218,000% crypto bandwagon is hard
Hong Kong: Don’t be too derisive of Eastman Kodak Co.’s yearning to reclaim its lost glory by jumping on the crypto bandwagon. If the dotcom bubble holds any lessons, the blockchain gravy train might have plenty to go around yet.
Investors aren’t waiting to see if the proposed KodakCoin is just a fad, or the real new, new thing for a company founded in 1888 by the inventor of roll film. Kodak’s New York-traded shares jumped 119% after it said the cryptocurrency will empower photographers and agencies to take greater control of image-rights management.
Whatever the economics of that premise, one thing is abundantly clear: It pays to be in blockchain.
I looked at 32 publicly traded firms worldwide that use “blockchain” or “crypto” to describe what they do. An equal-weighted index of their share prices has risen 218,000% over the past two years. These were sleeper stocks for most of 2016, undershooting even the staid MSCI All World Index.
But then came 2017, a year that culminated in Bitcoin futures being admitted for trading in the world’s largest exchange, and everything shifted.
After a reverse merger and a name change, Malibu, California-based Crypto Co.—which in a previous avatar made sports-bra pockets to hold cellphones while exercising—ended the year with a stock valuation of almost $12 billion. Hong Kong-based UBI BlockChain Internet Ltd rose 930% last year, despite including a disconnected phone number in its regulatory filings.
Some or all of this may be madness, but the early years of consumer internet should serve as a reminder that mania isn’t usually a one-year thing; nor must a reset of investors’ beliefs sweep everything away.
In June 1998, companies that flaunted “dotcom” or “.com” in their names or descriptions had a combined market capitalization of $11 billion, the same as blockchain or crypto companies do now. At the peak of the fever in March 2000, that would balloon to $68 billion.
Then came the painful burst, followed by the slow buildup of today’s web. The market cap haul now stands at $848 billion. Amazon.com Inc. continues to lead the field, as it did 20 years ago. But Salesforce.com Inc., as well as the American depository receipts of JD.com Inc. and Ctrip.com International Ltd, which were nowhere in 1998, hold the next three positions.
It’s impossible to say if any of the current crop of public companies claiming to tinker with blockchain or cryptocurrencies has the potential to be another Amazon.
It may be more meaningful to retrace HSBC Holdings Plc equity strategists’ path and evaluate companies that currently deal with mobile payments, electronic money or internet finance. Doing so throws up a diverse group. While Alibaba Group Holding Ltd and PayPal Holdings Inc. have an obvious claim to the list, Ping An Insurance Group Co. and Fosun International Ltd in China, as well as online retailer Rakuten Inc. in Japan, Bharti Airtel Ltd in India and Globe Telecom Inc. in the Philippines, could also have a shot at building and participating in money systems outside of government control, the bank’s research shows.
How about Kodak? The photography industry, as my colleague Tim Culpan says, is ripe for a new approach to keeping track of and monetizing content. However, that doesn’t automatically mean Kodak can pull it off.
And that’s really the main difficulty in jumping on the crypto bandwagon. With new technologies, there’s never a dearth of those who try—or pretend to. Firms that may eventually wring the most out of blockchain technology might not have even woken up to that possibility yet. Bloomberg Gadfly
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