As recently as January of this year, cryptocurrencies were seen by many as the territory of tech types and risk takers; a niche market unlikely to mature to the mainstream.
Within the course of a mere eight months, the market has risen by 800 per cent. Leading the charge, Bitcoin recently neared an all-time high of $5000, and other assets like Ethereum have seen notable price swings. Suffice to say even the most sceptical investors have been forced to sit up and take note.
But alongside such dizzying levels of success, have come concerns that bubble territory is just around the corner. Indeed, some analysts and commentators believe we are already there.
It's our view that we're just at the beginning of the story. Cryptocurrencies are still in the process of establishing themselves, and there are several reasons to believe we have a long way to go before we reach bursting point.
For starters, a bubble occurs when the value of the asset is disconnected from reality i.e. when the fundamentals do not warrant a surge in prices.
But the value of cryptocurrencies intended for payment, like Bitcoin, is inherently linked to the likelihood of these cryptocurrencies acquiring purchasing power in the real world.
We've already seen several retailers, including Lush, start to take online Bitcoin payments, and a number of coffee shops now accept it as payment in-store. As retailers have begun to embrace this new form of currency, governments and banks are also increasingly considering what purpose cryptocurrencies could have for them.
Building on the progress already made, we expect to see a waterfall effect in the coming months. An increasing number of retailers are tipped to follow suit behind Lush and it's likely that governments will spur one another on to look more closely at crypto. As more retailers and governments embrace these assets, we would expect the value to increase in tandem.
Of course, critics would point to recent regulatory wobbles to suggest that the debate has been snuffed out before it properly begun. But an asset like Bitcoin has shown itself to be more resilient than expected in the face of political uncertainty.
A China Crisis?Take the recent reports of regulatory concerns in China in South Korea, for example. Following an immediate sell-off when the Chinese government cracked down on ICOs, the market quickly bounced back with growth of almost 20%. If the recovery is this strong in the face of uncertainty, we can only imagine what could happen once regulated, and once the large fund houses feel comfortable entering this space.
Though we are confident of its long-term outlook, investors should still be wary of the risks involved with cryptos. As the market is still fairly nascent, there is a lot of volatility in the price. Investing in a longer-term outlook diversified strategy, is one way to navigate some of these short-term risks, but rapid change remains part and parcel of investing in these assets. We recently launched a Crypto Copy Fund, allowing investors to gain exposure to a number of cryptocurrencies all within one portfolio. This kind of investment can enable investors to minimise their exposure to risk.
With a number of milestones still ahead, we can't know exactly where the boom will end up. But as the real-world application of the asset becomes increasingly clear, we believe this bull has further to run.