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Bitcoin's rally fails to translate into gains for Asia crypto stocks

Hong Kong

THIS year's resurgence of bitcoin and other cryptocurrencies has yet to translate into the same kind of gains for some of Asia's more prominent crypto-linked stocks.

The largest digital coin is up about 150 per cent in 2019, surging past the US$9,000 level earlier this week ahead of Facebook's announcement for a cryptocurrency called Libra, that will be governed by a group of almost 30 companies including Visa, Mastercard and PayPal.

The prospect of Facebook and other mainstream institutions such as JPMorgan Chase & Co entering the space has been one of the main drivers of the so-called thaw in the "crypto winter" since April. US bitcoin-exposed assets have rallied: Grayscale Bitcoin Trust soared 189 per cent this year, Riot Blockchain rose 78 per cent, Marathon Patent Group climbed 50 per cent and Parateum surged 67 per cent.

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But there has been little follow through in Asia.

Monex Group, which owns the Japanese exchange and former hacking victim Coincheck, is down more than 2 per cent this year in Tokyo. The brokerage is counting on its investment in Coincheck to help its securities arm make up lost territory against its competitors.

Others include Remixpoint, operator of crypto exchange BITPoint, which has lost 10 per cent so far in 2019. Vidente, a shareholder of South Korean exchange bithumb, is down 14 per cent this year, while BC Technology Group, which launched new crypto exchange ANXONE earlier this year, is also down 35 per cent amid a wider selloff among Hong Kong-listed stocks.

"Companies that have invested in exchanges, I do think they will lag price appreciation in terms of the stock," said Vijay Ayyar, Singapore-based head of business development at Luno, a crypto exchange.

Companies need to "report at some point and actually show some guidance in terms of how they are able to convert their crypto revenue into fiat dollars".

While it can be difficult to determine a company's exposure to crypto relative to its other operations, Mr Ayyar sees three levels by which investors can roughly gauge how closely a stock may move in line with the price of bitcoin, with the first the most strongly correlated: Outright ownership of digital assets; investment in a crypto exchange; investment in a blockchain project.

"I do think that in crypto, the general consensus seems to be that you are basically better off owning crypto rather than trying to invest in the peripheral stocks," Mr Ayyar added.

"Owning crypto-linked stocks is lesser risk and potentially lesser reward because it's not going to directly be as lucrative." BLOOMBERG