By Paul R. La Monica
As Bitcoin heads toward $100,000, it looks like three tiny biotechs are hoping to emulate the success of MicroStrategy, the software company whose stock has gone into orbit as it plows money into the cryptocurrency.
In just the past week, Acurx Pharmaceuticals, Hoth Therapeutics, and Enlivex Therapeutics have announced plans to invest up to $1 million each in Bitcoin. That is, of course, an infinitesimal amount compared with MicroStrategy, whose balance-sheet holdings of 331,200 coins are now worth about $32.8 billion, one-third of its more than $95 billion market capitalization.
MicroStrategy stock is up nearly 600% so far this year.
The three biotech companies all said in news releases that they were taking the crypto plunge due to increased support for Bitcoin among institutional investors. They suggested that Bitcoin could be a good hedge against inflation.
"As demand for Bitcoin grows, and so does its acceptance as a major and primary asset class, we believe that Bitcoin will serve as a strong treasury reserve asset for cash not needed over the next 12 to 18 months" said David Luci, president and CEO of Acurx, in a press release, echoing similar statements made by Enlivex CEO Oren Hershkovitz and Hoth CEO Robb Knie.
It is true that big money-management firms, such as BlackRock, Fidelity, Invesco, and Cathie Wood's ARK Invest have all jumped into the Bitcoin pool with crypto exchange-traded funds. But whether Bitcoin actually is the new "digital gold" and can hold its value during times of dollar weakness and rising inflation over the long haul remains to be seen.
Regardless of where Bitcoin heads next, investors shouldn't expect any of these penny stock biotechs to take off. For one, they are all early-stage microcap companies that are thinly traded, volatile, and unprofitable.
Acurx, worth about $20 million, is the largest of the trio. To say that they were already risky investments before they announced plans to buy Bitcoin is an understatement.
Investors seem to realize that none of them are the next MicroStrategy. Only Hoth's shares got a modest pop this week, rising about 6% following its Bitcoin announcement. And all three stocks are down sharply this year, with Hoth tumbling 40% and Enlivex and Acurx each plunging more than 65%.
Still, it will be worth watching to see whether other larger and more recognizable publicly traded companies decide to buy and hold Bitcoin for their corporate treasuries.
Besides MicroStrategy, only a handful of other companies have Bitcoin on their balance sheets. Many of them are in the crypto sector, such as Coinbase; Block, owner of Square and Cash App; and Bitcoin miners MARA Holdings, Hut 8, and Riot Platforms. Elon Musk's Tesla is also a Bitcoin investor.
But who knows? Though the price is surging now, with a gain of almost 50% in the past four weeks, this could wind up being a short-term speculative top for Bitcoin. It is a little reminiscent of late 2017, when Bitcoin surged to nearly $20,000, and non-crypto companies flocked to the business.
A company named Long Island Iced Tea Corp., which made a nonalcoholic version of the popular beverage, changed its name to Long Blockchain. It was delisted in 2021. Penny stocks Rich Cigars and e-cigarette maker Vapetek also announced plans to become blockchain firms.
Bitcoin tumbled to below $4,000 by December 2018 and took about two years to recover to its 2017 levels. This doesn't mean history will repeat itself and that Bitcoin will plunge precipitously.
But investors should remember that any time there is a speculative mania like the one occurring now, more volatility, at the very least, is highly likely.
Write to Paul R. La Monica at paul.lamonica@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 22, 2024 12:25 ET (17:25 GMT)
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