The cryptocurrency space has been the hot sector of 2017 to date and it was only a matter of time before players in the space started to consolidate in an attempt to pick up an early mover advantage. Well, that time is here. One of the companies that we have highlighted on a few occasions as being one to watch in the sector, BTCS Inc (OTCMKTS:BTCS), just reported that it has signed a nonbinding letter of intent (LOI) that outlines a merger between it and an Australian bitcoin and cryptocurrency company called Blockchain Global Limited.
Blockchain Global will likely already be on the radar of those familiar with the bitcoin space. The company has established itself as a pretty big player in the sector over the last 12 months and across its various operations has managed to achieve a considerable degree of early success.
Markets are yet to respond to the latest major news (or are responding by trading flat on BTCS) and we see this lack of response as an opportunity to pick up an exposure ahead of a reevaluation. And this isn’t a revaluation rooted in the potential of BTCS, but instead in the opportunity to gain exposure to Blockchain Global that was previously unavailable.
Blockchain Global is a private company that operates across four distinct areas in the digital currency space. The first, and what we might call the primary, is an exchange called ACX.io through which users can buy and sell bitcoin as well as gain access to a variety of other secondary digital currencies.
The second is a transaction verification service (which is just another word for mining) that Blockchain Global runs out of a rented warehouse in China. This facility operates at a capacity of around 6 petahash and electricity cost at the operation comes in at around $0.04/kwh. Mining in China is cheaper than it is in the US and Australia and there’s a wave of entities doing exactly what Blockchain Global is doing right now in the region. For any readers looking to get a bit of insight into what this sort of facility involves, here’s a great discussion on the topic.
The third of the company’s four business arms is an incubator type model located in Melbourne. It’s a 6000 square-foot facility and it serves as an accelerated type resource for companies looking to operate in the bitcoin and blockchain spaces. For us, this is one of the most interesting aspects of Blockchain Global entities and area from which BTCS could generate a substantial return. As noted in previous coverage of the latter, BTCS is looking to operate in the Initial Coin Offering (ICO) space. With direct access to bitcoin and blockchain startups through the Blockchain Global accelerator, the company will have an inside line on a large number of these offerings.
The fourth and final operation is just a consulting type service so we are not going to go into the into much detail here. Suffice to say, it offers blockchain technology advisory services including the preparation and support of crowd-sourced Blockchain token sales and ICOs – again, feeding into the BTCS model.
The deal itself is pretty convoluted and is subject to a whole host of provisions, many of which might be tough for BTCS to meet. Being tough to meet doesn’t mean that they are prohibitive to the transaction completing, of course, but it does mean that there is a degree of risk associated with picking up a position in BTCS right now in anticipation of a smooth close.
With that said, however, if the deal goes through and BTCS and Blockchain Global become one, an exposure picked up at current prices will turn into an exposure to Blockchain Global, so it could be well worth a punt. For some perspective, BTCS is currently valued at a little over $15 million at open market pricing, while Blockchain Global generated AU$5.9 million (approximately $4.4 million) revenue in during 2016, a 300% increase over the number reported from 2015. Cash on hand (including a portion denominated in bitcoin) at Bitcoin Global is a little over $3.5 million.
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Image courtesy of Marko Ahtisaari via Flickr
Disclosure: We have no position in BTCS and have not been compensated for this article.