Bitcoin Surges Past $100,000: Listed Companies Rejoice Amidst Heightened Risk of Liquidations

Bitcoin Surges Past $100,000: Listed Companies Rejoice Amidst Heightened Risk of LiquidationsBy the end of 2024, Bitcoin's price skyrocketed past the $100,000 mark, hitting a record high of $101,900 per coin. This milestone event brought massive profits to publicly listed companies holding Bitcoin, but also triggered significant market volatility and a surge in liquidation risks

Bitcoin Surges Past $100,000: Listed Companies Rejoice Amidst Heightened Risk of Liquidations

By the end of 2024, Bitcoin's price skyrocketed past the $100,000 mark, hitting a record high of $101,900 per coin. This milestone event brought massive profits to publicly listed companies holding Bitcoin, but also triggered significant market volatility and a surge in liquidation risks.

Stocks related to Bitcoin in Hong Kong and mainland China's A-share markets surged. Following Bitcoin's breakthrough on December 5th, Boya Interactive (00434.HK) saw its intraday price increase by nearly 30%, while BlueFocus Interactive (08267.HK) rose by 20%, and Meitu (01357.HK) climbed almost 9%. Other companies like Xiong'an Technology and OSL Group also experienced price increases. Similarly, the blockchain sector in the A-share market performed strongly, with Jincai Mutual, Huayang Lianzhong, and Yuyin Shares hitting their daily limits, while companies like Lansung Guangbiao and Xinzhi Software saw increases exceeding 10%.

From the beginning of the year, the price movements of digital currency concept stocks in both the A-share and Hong Kong markets showed a positive correlation with Bitcoin's price. In the A-share market, Winshine's stock price soared by over 370%, while Qitian Technology rose by more than 170%. Other concept stocks like New Morning Technology, Sifang Jingchuang, Feitian Chengxin, Gaoweida, and Changliang Technology all saw increases exceeding 60%. In the Hong Kong market, Boya Interactive stood out, with its share price rising from HK$0.5 to around HK$6 per share, representing a year-on-year increase of over 1000%. However, Shopia Chen, head of a Hong Kong-based digital currency trading platform, noted that the share prices of related concept stocks, including Boya Interactive, were generally low, making them more susceptible to speculative trading in the event of a significant rise in cryptocurrency prices.

Bitcoin's price volatility resulted in a polarized outcome for market participants. Some companies reaped enormous profits from their Bitcoin holdings. For instance, Boya Interactive announced on November 12th that it held 2,641 Bitcoins at a total cost of approximately $143 million (an average cost of about $54,000 per coin), and 15,400 Ether at a total cost of approximately $42.58 million (an average cost of about $2,756 per coin). Between November 19th and 28th, Boya Interactive exchanged 14,200 Ether for approximately 515 Bitcoins, bringing its total Bitcoin holdings to approximately 3,183 coins at an average cost of about $57,700 per coin. Based on the latest Bitcoin price, Boya Interactive's unrealized gains from its cryptocurrency holdings approached $140 million (approximately RMB 1 billion).

Besides Boya Interactive, other Hong Kong-listed companies like BlueFocus Interactive and Guofu Innovation also held Bitcoin. Meitu, however, chose to take profits. On December 4th, Meitu announced the sale of approximately 31,000 Ether and 940 Bitcoin starting in November 2024, generating total cash proceeds of approximately $180 million and a profit of about $79.63 million (approximately RMB 5.7 billion). Meitu's 2023 annual report showed revenue of RMB 2.7 billion and adjusted net profit of RMB 370 million. The board plans to use approximately 80% of the net proceeds from the sale to pay a special dividend, with the remainder used as general operating capital to expand its image and design product business based on a paid subscription model. Morgan Stanley affirmed its "overweight" rating and maintained a target price of HK$4.5. As of December 9th, Meitu's closing price was HK$2.97 per share, implying potential for a 50% upside. Despite Meitu's profitable liquidation, some netizens believe it sold too early.

In the A-share market, relatively few listed companies held cryptocurrencies. Zhidu Shares (000676.SZ) stated on an investor interaction platform in August that it accounted for Bitcoin as intangible assets at cost. As of December 31st, 2023, the book value of its intangible assetsdigital assets (Bitcoin)was RMB 56.47 million. The company sold some Bitcoin in the first quarter of this year, but still held some as of early November.

However, Bitcoin's sharp price fluctuations also presented significant risks. After surpassing $100,000, Bitcoin's price plummeted in the early morning of December 6th, briefly falling below $90,000 to a low of $89,711.9, a maximum drop of 7%. This short-term crash resulted in massive liquidations, with an estimated 210,000 accounts liquidated for over $1 billion. Liquidations meant devastating losses for leveraged investors, potentially wiping out their entire capital.

Industry experts generally believe that Bitcoin is likely to continue rising after breaking the $100,000 barrier, but investors need to remain cautious. Dan Coatsworth, an investment analyst at UK investment firm AJBell, pointed out that Bitcoin's price surge can lead to overconfidence, but its volatility makes it unsuitable for investors with low risk tolerance. Furthermore, the widespread use of leverage in cryptocurrency trading, combined with its high volatility, significantly increases the risk of liquidation. Bryan Armour, head of passive strategy research at Morningstar, also noted the significant volatility of cryptocurrencies including Bitcoin, whose price is heavily influenced by market sentiment, highlighting the considerable risks involved in cryptocurrency investment.

Bitcoin's surge past $100,000 brought massive profits to companies holding it, but also underscored the high-risk nature of the cryptocurrency market. The market's exuberance masked the risk of liquidations, urging investors to exercise caution, avoid blind following, and prevent significant losses from leveraged trading. While surpassing $100,000 is a significant milestone, it doesn't guarantee continued price increases; market volatility remains a defining characteristic of the cryptocurrency market. Investors need to rationally assess risk and invest cautiously to achieve sustainable returns. In the face of Bitcoin's volatile price, listed companies also need to implement sound risk management strategies to mitigate market risks and protect their interests. In short, the opportunities and challenges presented by Bitcoin's surpassing $100,000 coexist. Market participants must maintain a clear head and make prudent decisions to succeed in this intense market competition. Meitu's decision to take profits offers a valuable lesson for other listed companies holding Bitcoin: capitalize on favorable market conditions to avoid losses from price drops. Regulatory bodies should also strengthen oversight of the cryptocurrency market to maintain order and protect investor rights. The entire event serves as a reminder that investment requires caution; high returns often come with high risks. Avoiding blind following and rational investment are key to long-term success. For listed companies, sound risk management and asset allocation are crucial to avoid over-reliance on single investments and mitigate risk. The future of the cryptocurrency market remains uncertain, requiring investors to closely monitor market trends and adjust their investment strategies accordingly.