Bitcoin had a crazy last week after the shocking news of South Korea's ban on the crypto trading. However, the craze around this digital currency and others like-and-related to it is just not slowing down with traders forecasting Bitcoin to hit $50,000 this year.
A big example of the bullishness around the cryptocurrency is Dogecoin. This cryptocurrency was created as a parody and got its name from an Internet meme. Last week, this currency breached the $2 billion mark, surprising even its founders, who created the currency just for fun.
Another big beneficiary of this cryptocurrency wave is GH Capital, Inc. (OTCQB: GHHC). Over the past six months, the stock has gained about 200%. The trading volume of the stock, which was almost negligible most of last year, surged to 481k at one point in December last year. The recent rally in the stock can be attributed to its business decision (announced November 2017) of "actively" exploring the "concept of utilizing blockchain capabilities as part of its core offering."
Last month, GHHC updated on its plans saying its ClickDirectPay (CDP) clickdirectpay.com – its online payment service subsidiary, will beta launch their “Bitcoin and alternative coin payment processing service by January of 2018." And, this week, it further updated on its plans that its new cryptocurrency payment service will allow merchants to accept four leading cryptocurrencies: Bitcoin, Bitcoin Cash, LiteCoin and Ether. The service will beta launch in mid-February 2018, and there are plans to add more currencies going ahead.
Though GHHC is not the only company to focus on facilitating cryptocurrency payment, an important point highlighted in the press release is the focus on lowering the transaction fees. “The aspect we need to focus on is the ability to solve a payment challenge with the lowest fees for both merchants and consumers,” said Mr. Bane Katic, Head of CDP Europe.
Currently, the Bitcoin transaction fee is around $40, and is expected to go up further, making it harder for smaller merchants to transact in it. Though GHHC is offering Bitcoin as a payment option, it adds that “we are looking at launching with other coins which are low fees and fast, yet still uphold the qualities of what the blockchain has to offer.”
Even though transacting in Bitcoin has got expensive now, it has become almost mandatory for payment processing company nowadays to relate to Bitcoin – the most popular cryptocurrency. GHHC admits this conundrum, saying dealing in Bitcoin “doesn’t make it affordable for consumers transacting in smaller amounts, some merchants may wish to offer Bitcoin for larger ticketed items.” Some big brands accepting Bitcoin as payment are Zynga Inc (NASDAQ:ZNGA), Shopify Inc (US) (NYSE:SHOP), Reddit, Expedia.com (NASDAQ:EXPE), Tesla Inc (NASDAQ:TSLA), Microsoft Corporation (NASDAQ:MSFT), Subway and many more.
So, facilitating Bitcoin is more of a forced option. Apart from Bitcoin, GHHC said it would focus on offering other coins with low fees, something that would benefit small merchants. Offering competitive fees is something that GHHC has done in the past (CDP has challenged established names like PayPal of Paypal Holdings Inc (NASDAQ:PYPL) by keeping its processing fee very competitive), and there are good chances that it would do so again.
GHHC CEO Wolfgang Ruecker talked of the same things in a ‘Shareholder Update Letter’ issued towards the end of last year. Ruecker said that the cryptocurrency opportunity, which he referred to as “emerging and huge,” will benefit the company in 2018. Talking further about the company’s plans, Ruecker noted that they would go global in the first-quarter, and the benefits of the same will be reflected in their financial numbers.
GHHC CEO expects“very strong” revenue in 2018, and the company is also considering acquiring companies in the payment industry. Such acquisitions would help in establishing CDP a significant player in the Cryptocurrency sphere.
What it means for the stock?
A trigger point here for the investors should be the expectations of “very strong” revenue this year. This, along with the point that the company is considering acquisitions to establish CDP as a one-stop solution for cryptocurrency processing, should encourage investors to remain optimistic on the stock. And, when all this is viewed in connection with the cryptocurrency craze, GHHC’s growth potential looks a lot more viable, giving enough reasons to investors to go bullish on the stock.
“I think what we have seen toward the end of 2017 is that cryptocurrency is here to stay and changing the dynamics of the payments and fintech industries,” Ruecker said in the shareholder letter.
Bitcoin Services, Inc. (OTCMKTS: BTSC) is a good example of the potential that GHHC holds. BTSC is involved in the mining of Bitcoin and other crypto currencies, and also offers Bitcoin escrow service. Further, it also develops and sells blockchain software. In the last one-year, the stock has gained by 3350%.
Prior to March 2016, it was medical device company - named Tulip BioMed, with little or no financial information. The stock skyrocketed after the company launched its website and cryptocurrency wallet subsidiary last year. Its focus on mining Dash and Monero is the biggest attraction towards it. These two are among the largest cryptocurrencies. Further, the company is leading the charge among privacy coins, allowing robust privacy and anonymity when transacting on the blockchain network.
So, the upside potential for GHHC is unlimited. It won’t be surprising if the stock trades somewhere between $1.80 and $2 by the end of the year. The GHHC has a 52-week high of $2.25, which it hit just a month back. So, such numbers are clearly not an unknown territory for the stock that is currently trading around $0.70.
By exploring potential in the cryptocurrency processing, GHHC has clearly laid a solid foundation for its future growth. And, if most of the things (if not all) goes as per the plans, GHHC will create substantial value for the stakeholders.
We don’t have positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours.
Aman is an MBA (Finance) with over 8+ years of industry experience. He has worked as Risk Analyst for a CAT Modeling firm, and now heads a boutique-consulting firm with a focus on stock research, business plans, valuation and accounting.
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