I have written a few articles on WPCS International (NASDAQ:WPCS), because it is a huge battleground stock. Its main catalyst for growth moving forward is its acquisition and development of a Bitcoin trading platform. This platform could revolutionize the trading of Bitcoin.
But just what is Bitcoin? Many readers still can’t wrap their heads around exactly what it is. In layman’s terms, it’s a digital currency. It is money. It isn’t paper; it only exists over the Internet. You can buy into it by purchasing one of a fixed number of slots in the existing ledger, either with cash or by selling a product and service for Bitcoin. You sell out of it by trading your Bitcoin to someone else who wants to buy in. The only thing you need to know is that you need an Internet connection.
Right now there are no or very low fees for trading Bitcoin, but the process is not simple. This is where WPCS comes in. WPCS is developing a fantastic trading platform that is still in beta. However, this platform will become in high demand (provided it works efficiently) as Bitcoin becomes more mainstream.
Many investors are scared of Bitcoin. This is because of all of the negative hit pieces on the currency in mainstream media, as well as reports of glitches with subpar trading platforms. But Bitcoin is simply a kind of payment system on a global scale. Any individual can pay another any amount of value of Bitcoin. If you have the money or the asset, you can pay with it; if you don’t, you can’t.
Unlike credit cards, there are no chargebacks. This is a huge benefit. But what about the value of Bitcoin? What is it worth and how do we value it? Figure 1 has the three-month price of Bitcoin.
As you can see, Bitcoin is very volatile, trading up to well over $1,000 and currently back down to $633. It has come down after some technical glitches, issues over safety, and legality. Despite these issues, Bitcoin’s value is based more on speculation than actual payment and transaction volume. With the speculation of its future use as a mainstream currency, Bitcoin has risen in value.
Merchants like it because Bitcoin can be used entirely as a payment system, while at the same time, they don’t need to hold any Bitcoin currency. Anyone can trade in and out of Bitcoin and other currencies at any time they want. More and more merchants are accepting Bitcoin. Now it’s a matter of developing applicable, user-friendly but powerful trading systems much like the one WPCS is developing. But if Bitcoin is getting crushed on recent news, why isn’t WPCS being taken down?
WPCS is not reliant on Bitcoin price appreciation. Here is the kicker: All of this up and down and wild trading action in Bitcoin is a substantial benefit to WPCS. Why? Think about it. WPCS is developing a blockbuster Bitcoin trading platform. Once monetized, WPCS’s revenues will depend on trading activity. Ask yourself this: Does something that is flat and stable in price often have many trades on it per day? In some cases, yes, but things that are volatile tend to trade with significant volume.
If the price of Bitcoin is fluctuating, this is a huge positive for WPCS, as it means more individuals will be trading the currency. The day traders will emerge, trying to buy low and sell high. Weak hands will trade out of the currency for fear. This means more trades on the system and more commissions that can be earned. However, in fairness, if it becomes too unstable, it could dissuade future merchants from accepting Bitcoin given the instability. So the ideal is a currency that is volatile but not unstable.
At this point, Bitcoin is setting up that way. Second-quarter 2014 is the scheduled release of the BTX Trader software globally. At this low a price, it is a strong buy for a trade, in my opinion. Bitcoin price fluctuations should actually help WPCS stock as the astute trader/investor realizes this is gold for WPCS, a company designing a trading platform that will eventually monetize.
Disclosure: Christopher F. Davis has no position in WPCS but has a standing order to initiate a position at $1.55.