Bitcoin’s climb to above $11,000 for the first time in 15 months sparked gains in related Asian stocks Monday.
GMO Internet Inc. climbed 7% in Tokyo to its highest level since October, while Metaps Inc. jumped 11%, Remixpoint Inc. 6.2% and Ceres Inc. 4.4%. In Seoul, Vidente Co. climbed as much as 5.4% and Woori Technology Investment Co. added 4.6%.
“Bitcoin resurgence should be a definite reason behind these gains,” said Supun Walpola, an analyst with LightStream research who publishes on Smartkarma. “Going long on stocks that have exposure to cryptocurrency is something that we have seen in the past during a Bitcoin/cryptocurrency bull run — especially with those who want to avoid the volatility of crypto but at the same time want to have some exposure into these markets.”
Walpola noted that the impact of cryptocurrency gains differs widely among different companies, with a relatively smaller bottom-line boost at larger firms such as GMO than at smaller ones like Remixpoint. “But something that we have seen in the past is that the stock prices tend to increase more than the actual benefit that these companies would get during a crypto surge, which has always resulted in immediate corrections,” the analyst said in an email.
GMO Internet provides a vast array of web-related services as well as investments in a number of listed subsidiaries. In a report dated May 16, Jefferies said “GMO will be putting more focus back on its Bitcoin mining business again,” after moving its servers to a new location with cheaper electricity. The company’s shares are up 34% so far this year.
Crypto stocks tracked the surge in Bitcoin in late 2017, and some tumbled with it last year. So the question is how long will the latest rally last.
“We have seen from past experiences that any success on this front is short-lived,” Walpola said. While investors see stocks as a chance to cash in at relatively lower risk, “such strategies have often gone wrong when crypto markets turn red — which could happen just about at any time.”