The downward trend has affected the cryptocurrency market since the beginning of 2018.
This followed, with quick succession, a period of excitement that was 2017 when the market was rocketing upwards with the price of the cryptocurrency forerunner – Bitcoin – rising to a near $20,000 back in December 2017.
We have yet to get to half that price this year.
The drastic hit has exposed cryptocurrency investors to significant losses despite most of them still remaining upbeat about the sector, assuring the world that the value of their digital currency will soon soar once again. However, this has yet to be realized and with the current motion in the industry, expectation is a distance from reality.
The truth about the sector is revealed by the share price of stocks such as Cryptobloc Technologies Corporation (CNSX:CRYP) which operate within the cryptocurrency space. Over this period, the company’s share price has plummeted greatly, falling from a near $.2 just a month ago to $.034 currently: an 83% decline over a single month. Sadly, this follows the trend which the share price has been following given that it had just come from hitting a high of $.25 back in May and is correlated with the consistent decline in the volume of shares traded during this period.
Readers can view the price action described above on the chart below:
Despite this, we find it important to evaluate other company fundamentals; the reason, the establish whether the reason for the dismal share price performance is purely market forces or an inherent failure by management to meet the expectations of the market.
We have since come up with the following report.
History of Cryptobloc
Prior to establishing how the company is currently doing, we need to evaluate where they have come from and the strides taken till here. Let us briefly look at their history.
Cryptobloc Technologies Corp was incorporated back in 2015 under the laws of Vancouver, Canada. Back then, the company was known as Global Remote Technologies Ltd, a name which was changed back in March 2018 to their current name to signify the change they had just made in their operating environment.
Currently, the company operates primarily in the blockchain segment, choosing to focus on the provision of blockchain based services such as development and implementation of blockchain, cryptocurrencies for private and public entities and distributed ledgers. Furthermore, given their past technological experiences, they borrowed a leaf and also provide application programming interface (API) services for some of their products to enhance the user experience.
All in all, the company brings to the market significant experience within this sector and have come to solve problems akin to centralization – all which blockchain is believed to be solving in the current market.
As such, there is a lot which they have to offer, however, the reason for their grim performance given all the above is yet to crystallize.
Developments Affecting CRYP
The company’s developments kickstarted two months ago when an announcement was made that they were to procure about 5,000 cryptocurrency mining machines.
In their clarification to the letter of intent back in April, Cryptobloc explained that they would be purchasing these machines over a 12-month period at an average price of $1,400 per unit – upon factoring in the discounts associated with a bulk purchase. The parties agreed that the machine values would be equal to the cost of the machine plus 20% and its repayment would be based on the value of Bitcoin – the cryptocurrency being mined – as well as the machines’ efficacy over a 12-month holding period.
In here we find the first problem facing the company and leading to the decline.
Soon after this, the company raised $4.5 million via a non-brokered private placement. Here, they issued 300 million shares at a price of $.15 to their investors, an amount which was quickly taken up. The funds were intended for use in general working capital and towards new acquisitions.
The Issues That Have Rocked CRYP
Let us jump right into the problems rocking the company.
As stated above, the key problem arose right at the purchase of the mining units. Walk with me as I explain.
In finance, there are different types of costs. One of these is a sunk cost – costs which have already been made that cannot be taken back. Such would include the cost of excavation while mining which cannot be taken back whether the miner finds gold or not. In addition to this, there is breakeven, associated with the amount one needs to make to cover their fixed costs. In order to achieve breakeven, a firm must produce a specific amount that will generate ample revenues thus profits so as to cover the costs already borne.
In this case, the sunk cost was the cost of purchasing these machines. Whether or not the machines brought in the value associated with their purchase, the cost had already been borne. Furthermore, for the company to breakeven, they needed to keep mining Bitcoin and above that, the value of Bitcoin needed to either remain constant or inflate with time.
None of the above has happened as had been expected.
Since then, the value of Bitcoin has been on a downward spiral, tending now towards $6,000 from the $19,000 it once stood at. Furthermore, it has become harder and harder to mine the cryptocurrency – in line with the proof of work concept – given the size of the blockchain. This means that the company is now finding it more difficult to explain to their investors how they expect to accrue the value they once promised, leading to a price decline.
The Purported Requisition
News about a shareholder who had sent a purported requisition to the company further sent shockwaves through the company.
This, however, turned out to be false as the shareholder had merely sent a letter where the shareholder demanded a change in management and the board of directors as well as challenging the company’s current business plan. Management, however, requested her to write directly to them on whatever matter she wished addressed and they would look into it.
It is our view that holding the current cryptocurrency environment as is, it will be hard for the shareholders of CRYP to buy into the idea that business will soon boom. With the market on a downward spiral and costs still being maintained, the business will continue on a loss-making venture into the future. As such, prudence would dictate that the management heed to the words of the shareholder’s letter and evaluate their business plan even further so as to find a way to match their short and long-term objectives as well as their cash flow situation – as this does not currently seem to be in their favor. Diversification would also be prudent for them.
Despite the market still playing a major role, as a result of the decline in the price of Bitcoin, the management at CRYP still have a long way to go before convincing investors that their business model is effective. Given their current standing, however, we expect the stock to continue on its bearish run over the short term.
We will be updating our subscribers as soon as we know more. For the latest updates on CRYP, sign up below!
Disclosure: We have no position in CRYP and have not been compensated for this article.