Shares of Gain Capital Holdings Inc (NYSE:GCAP) are up about 10% as of 11:30 a.m. EST Thursday after Mox Reports wrote that the stock could rise to $18 to $23 per share, and that "crytpo mania" could potentially send shares even higher. The online brokerage service recently rolled out bitcoin trading to its customers in the United Kingdom, which Mox Reports believes could be a boon for the business and its share price.
Gain Capital primarily makes its money as a foreign exchange broker, operating under the Forex.com and City Index brands. City Index recently rolled out bitcoin spread bets and contracts for difference trading on its platform, enabling speculators to place bets on the direction of bitcoin's price.
The company announced the new products in a press release on Dec. 1. A snippet from that press release appears below:
City Index U.K. customers can trade Bitcoin either as a spread bet or as a contract for difference (CFD), with access to competitive spreads, margin and financing, as well as the ability to take both long and short positions. GAIN Capital has established liquidity relationships with multiple Bitcoin exchanges and uses these leading exchanges to produce a volume-weighted average price that is reliable and transparent.
The Company plans to roll out Bitcoin trading to its City Index customers globally over the coming quarter, as well as expand the offering to its FOREX.com customers in select markets before the end of the year.
Gain Capital's bitcoin products are competitive with other exchanges' and bitcoin futures in the United States. Notably, City Index offers leverage of up to 3:1 and the ability trade bitcoin in a size that currently approximates half a bitcoin. Bitcoin futures markets in the United States offer less leverage and may not be suitable for smaller speculators because of the larger minimum size of each trade.
Gain Capital Holdings is different from most bitcoin stocks in that it is a legitimate, regulated company that has a real business. As Mox Reports wrote, Gain Capital Holdings has also been consistently profitable, though it's a very small operator. As of Sept. 30, the company had fewer than 134,000 retail account holders with combined assets of less than $739 million, most of whom trade currencies.
As Mox Reports points out, online bitcoin exchanges have blossomed from bitcoin's soaring price. Coinbase, the largest on the market, added as many as 100,000 accounts in a single day as the price of bitcoin soared, and now has more accounts than online discount broker Charles Schwab.
If Gain Capital can capture just a small percentage of international bitcoin trading, it could have a meaningful impact on the business, driving account and profit growth for the bite-sized broker.