What happened
The price of bitcoin is volatile these days, so I apologize if real-time prices differ significantly. As I began this writing, bitcoin nearly hit $42,000 per token -- an all-time high -- though it's since cooled off a little. Still, the price of bitcoin has more than doubled in just one month. And its market capitalization is now over $750 billion. Yes, billion.
When something this big goes up this fast, it's bound to attract attention as investors look for hidden ways to profit from the trend. Small-cap cryptocurrency stocks have been popular vehicles and many are on the rise again today. Consider these moves as of 12:30 p.m. EST:
- Shares of Marathon Patent Group (MARA +6.22%) were up 18%.
- Shares of Riot Blockchain (RIOT 8.51%) were up 13%.
- Shares of Bit Digital (BTBT 8.49%) were up 5%.
But not all crypto/blockchain stocks were rising today. For example, Xunlei Limited (XNET 2.88%) stock and Ebang International Holdings (EBON +0.00%) stock were down 15% and 6% respectively. This is a big change from yesterday when Xunlei was the big winner and Bit Digital was losing.
Finally, making its debut in my crypto coverage is Future FinTech Group (FTFT 3.19%). The stock is up 31% today but it had nearly doubled earlier in the session. I believe Future FinTech has something to teach investors today. Note the company was formerly known as SkyPeople Fruit Juice, Inc. And no, I'm not kidding.
Image source: Getty Images.
So what
Future FinTech Group is self-described as "a leading blockchain based e-commerce company and a financial technology service provider." But it wasn't always. Until 2019, its filings with the Securities and Exchange Commission (SEC) say it was "engaged in the production and sales of fruit juice concentrates, fruit juice beverages and other fruit-related products in the People's Republic of China." The juice business got too hard, though (high costs and environmental concerns were the cited reasons), so the company decided to offer financial technology (fintech) services instead.
Yesterday, Future FinTech issued a press release saying it's successfully copyrighted 10 blockchain applications in China. The company notes its commitment to blockchain because of its application in areas like record-keeping and identity security, among other things -- and I agree that's the real-world possible value of blockchain technology. Tokenized assets such as bitcoin are just one possible application of the underlying tech.
Image source: Getty Images.
However, investors interested in Future FinTech stock need to keep in mind that "future" is a very apt description of this company. In the company's investor presentation, it notes it generated $314,000 in revenue for the period ending June 30, 2020. Not million -- thousand. And it also had less than $1 million on its balance sheet at the time.
Future FinTech's SEC filings note a "going concern," meaning there's reasonable doubt for the long-term viability of this business. Perhaps its blockchain enhanced e-commerce sites are the future. But for now, this incorporated-in-Florida but doing-business-in-China fruit juice company turned fintech player needs cash. It all sounds fishy to me. Don't be surprised if yesterday's good news regarding copyrights is followed up with a stock offering in the near future. We've seen this movie before. For example, just a few days ago Marathon raised $200 million by selling stock.
These stocks have had incredible six-month runs. FTFT data by YCharts
Now what
To me, Future FinTech stock demonstrates just how hungry investors are for life-changing stock market returns. Obscure small-cap stocks and penny stocks seem to be where people are looking. The other cryptocurrency stocks mentioned in this article have all been bid up to lofty valuations with little fundamental support from their businesses. Sure, miners like Riot Blockchain, Marathon, and Bit Digital are better off as bitcoin rises. But their valuations seem excessive at this point.
If you've caught a five-, ten-, or even 20-bagger in a matter of months, I congratulate you. I truly do. But investors should always keep in mind the risk they're taking on. I would never risk my hard-earned money on a fruit juice company trying to develop blockchain technology with less than $1 million in the bank. I wouldn't risk it because I simply don't have to -- low-risk stocks with multibagger potential are all around. The trick is finding them, buying them, and holding them for a really long time.
Bitcoin could keep rising, leading to further volatility in the stocks mentioned here and more in the days and weeks ahead. As Bit Digital, Ebang, and Xunlei demonstrate, you can never know for sure what will happen on a day-to-day basis or when the music will ultimately end. For that reason, I strongly recommend investors use the majority of their investable money on a diversified portfolio of low-risk, high-reward stocks.
