Online Blockchain (LON: OBC) might be doing just fine internally to the company. Folk are turning up, doing the work, getting things done. But OBC has a problem, just like any other company in the sector. If the Bitcoin price does badly then so will the share price. Simply because everything in the sector is geared to that BTC price.
We looked at this with reference to Marathon Digital: “Marathon Digital (NASDAQ: MARA) stock is down 15% or so. MARA stock is down because Bitcoin, BTC, is down. That’s just how mining works, the miner is geared to the price of what is being mined. This is true of physical mining just as it is of crypto mining. The price of lithium, or BTC, Litecoin, is whatever it is. The production of the one mine is much the same as that of any other, there are many miners of all of them. Miners are, therefore, price takers – they get simply the market price for their production. If that changes then so do their revenues – simple enough. But their costs – in crypto, their energy costs more than anything – don’t change in line with the market price. Thus changes in BTC feed directly through to the bottom line of Bitcoin miners. Great on the upside, not so much on the down.”
Now it’s true that Online Blockchain is not just and only in the mining business: “Online Blockchain Plc is a blockchain research and development company. The principal activity of the Company and its subsidiaries is that of an incubator and investor in Internet and information businesses, developers, administrators and custodians of blockchains and cryptocurrencies. It operates through two segments: provision of management services and other. The other segment includes mining, Umbria Bridge network and advertising. The Company is focused on the development of blockchain technology.” But we are going to see the same effect here.
Online Blockchain share price from Google Finance
This is, we’re afraid, just one of those things about being in a commodity market. Everyone’s individual Bitcoin is exactly the same and therefore sells for exactly the same price. That means that Bitcoin companies are price takers – which is rather what being in a commodity business means. So, when the bitcoin price changes so will the value of the company. And that, we’re afraid, is simply how it works.
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