It’s up. It’s down. It’s all around. The recent furore over malware hackers hijacking thousands of government websites to mine cryptocurrencies perhaps goes to highlight again that there’s no such thing as bad publicity as, having peaked in December at $19,434, the price of bitcoin seems now to have stabilised at around $10,000. However, during this one-month period of volatility, the fourth in its short lifespan, the cryptocurrency market witnessed some $400bn in ‘virtual wealth’ being swept away. An incredible amount by anyone’s standards but still dwarfed by the dotcom crash of the early noughties which vaporised over $5 trillion.
Yet even in its present comparatively calm state, it has still risen a massive amount over recent years and, whilst some predict this will continue, other equally venerable investors predict exactly the opposite. In this market you pays your money, you takes your choice. One important lesson we should all have noted from the whole saga is that if you seek to increase your long-term wealth more quickly than others, then it’s undoubtedly worth keeping an eye out for the next big thing as reward always goes hand-in-hand with its bed-partner, risk.
On that note, 2018 will prove to be the year that regulation is brought to bear upon cryptocurrencies and speculators & investors can expect a far higher degree of KYC (Know Your Customer) information being necessary within the transaction process, together with a level of strict anti-money laundering controls. Furthermore, a raft of crypto-backed financial products and sterling-to-crypto exchanges will help the major cryptos (bitcoin, Ethereum, Litecoin, Ripple etc.) stabilise as they inch towards mainstream acceptance.
Venezuela launched its own crypto last week and with the ‘petro’, backed by the country’s pretty meagre oil reserves, the country is hoping it’ll pull the nation out of its current economic tailspin. More successful I suspect will be Switzerland who appear particularly keen on establishing themselves as the ‘go-to-hub’ for cryptofinance and don’t seem to mind breaking ranks with the old school in their support of the recent swathe of initial coin offerings (ICOs are the digital equivalent of the dotcom’s IPOs – uh oh…). In a similar vein, in recent months the number of hedge funds focussing on cryptos has grown from twenty to more than 150, and although the assets currently managed are still relatively small ($3bn compared with $3.4trn) don’t count on this remaining the case for long.