Bitcoin, Valued Like a Cool Blue Chip, Trading Like a Hot Small Cap

The stock market is having a good year. Bitcoin is having a better one.

The crypto sector is in the middle of a wild bull run sparked by the emergence of the so-called initial coin offering and a surge of trading in Japan and South Korea. As of Friday, the digital currency was up 352% year to date. Only four U.S.-listed stocks have had a better performance: PolarityTE, up 735%, AVEO Pharmaceuticals, up 604%, Straight Path Communications, up 431%, and Calithera Biosciences, up 362%.

Bitcoin has different characteristics than a stock – there is no Bitcoin Inc. through which investors can share the profits, for one – but there are notable similarities between those four stocks and bitcoin: speculation. Three of the stocks are in the biotech field, where progress on one key drug can send shares soaring, and the fourth, Straight Path, was the subject of a bidding war between Verizon Communications and AT&T

Like many biotech stocks, bitcoin’s value is inextricably tied up in speculation. Bitcoin has risen so much that it’s worth debating exactly what buyers are getting for their $ 4,300, and where it will go if they hold it. And that’s to say nothing of its nearest rival, ether. That digital currency, used on the Ethereum network, is up more than 4,000% this year.

Those gains are like catnip to traders.

“The S&P 500 has performed tremendously since 2009, however, volatility, trading volumes, and general investor interest has collapsed alongside a secular bull market,” Arthur Hayes, the CEO of digital-currency options exchange BitMex wrote in a research note. “Volatility is the lifeblood of traders and digital-currency markets. While the usefulness of bitcoin in everyday commerce is limited by volatility, it captures the attention of traders.”

Bitcoin certainly still has its skeptics, but its volatility and gains this year have indeed caught the attention of traditional capital markets. An exchange called LedgerX received approval from the Commodities Futures Trading Commission to start clearing bitcoin options. The CBOE is moving toward creating its own bitcoin-derivatives listings. Even after two rejections from the Securities and Exchange Commission, several groups are still trying to get the commission to approve a bitcoin ETF.

Meanwhile, all of this is just fueling the sense in the crypto world that bitcoin’s moment has arrived, which is also helping drive the price higher, and the currency’s backers are vaunting it over their old-world friends.

The gains this year have taken bitcoin’s market value to $ 71.5 billion. At that level, it appears to be valued more closely to an established company like Nike ($ 71 billion), or Caterpillar ($ 68 billion), than a $ 159 million market-cap stock like PolarityTE. But it’s worth observing that bitcoin trades a lot more like Polarity and other small, speculative stocks than it does the blue chips.

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MoneyBeat » Bitcoin

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