What's Going On with Bitcoin Now? Brendan Cody, Impact Investing Intern, George Washington University
The meteoric rise of cryptocurrencies supported by the blockchain has regulatory agencies, financial institutions and central banks around the globe asking the same question: What in the world is going on here?
Applications in finance, data storage, cybersecurity, and government merit the attention blockchain technology has received. As of last week, Bitcoin (the first and most notable cryptocurrency) approached $5,000, up +600% on the year compared to a 20% return for the Dow Jones Industrial Average over the same time. (Bitcoin has since returned to the more mundane level of $4,470 as of 9/5/17) Other cryptocurrencies ,including Litecoin and Ethereum, have seen a similar pattern of rise, retreat and rise.
Governments and financiers acted decisively in the past month in an attempt to seemingly make up for lost time. The Securities and Exchange Commission issued new regulations on the proliferation of Initial Coin Offerings (see: the American Banker Newspaper BankThink section - SEC takes jab at startups while leaving the big banks alone at https://www.americanbanker.com/opinion/sec-takes-jab-at-startups-while-leaving-the-big-banks-alone). Chinese regulators issued an outright ban on ICOs. Additionally, central governments in Russia, Estonia and Thailand have been studying blockchain. Russia and Thailand may create their own cryptocurrencies while Estonia is studying the potential to secure records and government data on the blockchain. New regulations foreshadow further actions as policymakers pay closer attention. (For our take on what should be done at this stage in the development of these new financial technologies, see: Why we need a Global ICO Census and Database. https://www.linkedin.com/pulse/global-ico-census-database-william-michael-cunningham-am-mba)
Furthermore, six of the world’s largest financial institutions announced the development
of a cryptocurrency to improve “record-keeping and transparency” of financial transactions. This
“utility settlement coin” is intended to speed transaction and asset transfer times while maintaining privacy and security. If executed correctly, this could lower transaction costs and time without sacrificing quality. The coin is still in development, with a projected launch date at the end of 2018. (NOTE: Picture at left not necessarily reflective of the author's opinion.)
Wall Street has also taken notice, with fifty hedge funds (including one backed by Mark Cuban) now exclusively focusing on cryptocurrency investing. Institutional finance’s interest in cryptocurrencies will only increase, with a Blockchain Electronically Traded Fund coming online soon and increased access for retail investors.
The myriad potential uses of blockchain and increased interest from financial institutions might prolong the rally in asset prices for the foreseeable future. (Already, bitcoin shows signs of recovering from the Chinese Government's sudden policy shift.) Bitcoin’s volatility may keep some investors away amid a distinct possibility of a pullback, but for buy-and-hold investors with a long-term outlook, there is still great value in cryptocurrencies. When compared to bonds at historically low and even negative yields and equities at high valuations, cryptocurrencies present value for risk tolerant investors unmatched by other asset classes.
Governments and financiers acted decisively in the past month in an attempt to seemingly make up for lost time. The Securities and Exchange Commission issued new regulations on the proliferation of Initial Coin Offerings (see: the American Banker Newspaper BankThink section - SEC takes jab at startups while leaving the big banks alone at https://www.americanbanker.com/opinion/sec-takes-jab-at-startups-while-leaving-the-big-banks-alone). Chinese regulators issued an outright ban on ICOs. Additionally, central governments in Russia, Estonia and Thailand have been studying blockchain. Russia and Thailand may create their own cryptocurrencies while Estonia is studying the potential to secure records and government data on the blockchain. New regulations foreshadow further actions as policymakers pay closer attention. (For our take on what should be done at this stage in the development of these new financial technologies, see: Why we need a Global ICO Census and Database. https://www.linkedin.com/pulse/global-ico-census-database-william-michael-cunningham-am-mba)
Furthermore, six of the world’s largest financial institutions announced the development
of a cryptocurrency to improve “record-keeping and transparency” of financial transactions. This“utility settlement coin” is intended to speed transaction and asset transfer times while maintaining privacy and security. If executed correctly, this could lower transaction costs and time without sacrificing quality. The coin is still in development, with a projected launch date at the end of 2018. (NOTE: Picture at left not necessarily reflective of the author's opinion.)
Wall Street has also taken notice, with fifty hedge funds (including one backed by Mark Cuban) now exclusively focusing on cryptocurrency investing. Institutional finance’s interest in cryptocurrencies will only increase, with a Blockchain Electronically Traded Fund coming online soon and increased access for retail investors.
The myriad potential uses of blockchain and increased interest from financial institutions might prolong the rally in asset prices for the foreseeable future. (Already, bitcoin shows signs of recovering from the Chinese Government's sudden policy shift.) Bitcoin’s volatility may keep some investors away amid a distinct possibility of a pullback, but for buy-and-hold investors with a long-term outlook, there is still great value in cryptocurrencies. When compared to bonds at historically low and even negative yields and equities at high valuations, cryptocurrencies present value for risk tolerant investors unmatched by other asset classes.
(To get involved in Bitcoin, use this link to get $30: https://etoro.tw/3O7fFeW)
(Illustration by Jacques Barkhuizen, Chief Information Officer - Distribution & Digital at Barclays)
Edited by William Michael Cunningham