We featured Digatrade Financial Corp (OTCMKTS:DIGAF) in a piece called "Digatrade Financial Corp (OTCMKTS:DIGAF) Is A Cheap Exposure To Bitcoin", which was published on August 2, 2017. It could not have been a better time to release the article, as the share price commenced to increase a few days after. Have a look at the recent share price action:SourceWell, what happened? This is the interesting thing. The company has not released news in this period, and no filings were received by the market. Hence, we believe that the share price move was created by the increase in the value of the bitcoin. In this article, we will provide you more details, but before that, please check the recent bitcoin's price action:SourceWhat's going on with the bitcoin, which is affecting the company?SourceLet's revise DIGAF's business model to understand how it is profiting from the bitcoin upward trend. The company provides global digital asset exchange and blockchain development services. It is headquartered in Vancouver, British Columbia. But in order to be a global operator, it owns several subsidiaries in Europe, and the US. Have a look at the group:EntityCountry of IncorporationHoldingFunctional CurrencyDigatrade Financial Corp.CanadaParent CompanyCanadian DollarDigatrade LimitedCanada100%Canadian DollarDigatrade (UK) LimitedUnited Kingdom100%Pounds SterlingDigatrade LimitedUSA100%US DollarSourceHow is revenue generated? This is what we found in this regard in the documents provided by the company:
"Revenue is comprised of consulting fees and commissions earned on trades executed on the digital currency trading platform. Consulting fee income is recognized as the consulting services are provided. Commission is considered earned when a trade is completed by the Company’s customers. As the platform is not yet fully live, commissions and consulting fees earned have been accounted for as a recovery of development costs incurred." Source
Hence, there is close link between the bitcoin's market capitalization and the business model of the company. With that in mind, is the upward trend going to continue? We cannot be sure about it. Some have tried to predict the movement of the bitcoin in the past. This is, for example, a graph, published by Zero hedge:Source (Authored by Charles Hugh Smith via OfTwoMinds blog)Others, such as Ronnie Moas, who researches for Standpoint, are providing very high expectations. He believes that we will see bitcoin priced at $7,500. Additionally, he said that hedge funds are also playing very seriously with the currency:
“I believe there are hedge funds and very deep-pocketed individuals going into this now, really hundreds of millions of dollars.” Source
Finally, we have also more conservative groups, such as Richard Turnill, BlackRock’s global chief investment strategist, who recently said that there is a bubble in cryptocurrencies. What are governments saying about the currency? That is an interesting fact to point out and a very significant catalyst to check out. Every time a government has communicated its intention to regulate the bitcoin, its value has gone higher. In fact, Japan and Russia accepted it very recently. This is the information from cnbc.com:
“Earlier this month, Japan began accepting bitcoin as legal currency with major retailers backing the new law. Consumer electronics retailing giant Bic Camera began accepting bitcoin last week.” Source
What about the US? The SEC has been issuing reports about the bitcoin since 2016 and many media companies have assessed how it affected the bitcoin price. Read the following text:
"The SEC is finally starting to regulate Bitcoin and other cryptocurrencies." "For example, if a country’s regulatory body decides that cryptocurrencies should be banned, then this will drag down prices (depending on the size of the country) and blockchain technology companies will avoid setting up shop or investing there – they won’t feel welcome. Source: http://www.businessinsider.com
What's the last communication from the SEC regarding this matter? On July 25, 2017, the SEC released more information about the Initial Coin Offering (ICOs):
"The SEC's Office of Investor Education and Advocacy today issued an investor bulletin educating investors about ICOs. As discussed in the Report, virtual coins or tokens may be securities and subject to the federal securities laws. The federal securities laws provide disclosure requirements and other important protections of which investors should be aware." Source
What's our conclusion from this release? The SEC is finally trying to regulate the sector, which means that it is taking bitcoin more seriously. In our opinion, it is good for the value of the bitcoin, and may help explain the recent upward trend that we have seen in this article.ConclusionIn this article, we saw that DIGAF seems to be correlated to the price of the bitcoin, and also to the regulatory efforts that governments decided to implement. In our opinion, the story is not over, as the technology is quite new and continues to expand. Now that the US, Japan and Russia commenced to regulate the currency, there are very good questions that come out: will we be able to buy products on the street using bitcoin? How will the new technology affect the credit card business? To sum up, we will keep an eye on this company, as it is positioned to capitalize on the development of this new world of opportunities.Be sure to check out our coverage on DIGAF.We will be updating our subscribers as soon as we know more. For the latest updates on DIGAF, sign up below!Image courtesy of Antana via FlickrDisclosure: We have no position in DIGAF and have not been compensated for this article.
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