Cryptocurrencies have continued their meteoric rise in recent weeks, with alternative players such as ether and dogecoin gaining ground on their biggest rival bitcoin.
While retail traders on social media are bullish about crypto’s prospects, the City and institutional investors remain split on whether the digital assets represent a market opportunity or a whale-sized risk.
Bank of England governor Andrew Bailey told reporters on 6 May that those who invest in crypto assets should “buy them only if you’re prepared to lose all your money”.
But a few hours after he spoke, ether rose to a fresh record high of above $3,556 as traders seemingly ignored the warnings.
READ Dogecoin on the rise: What’s behind the meme coin’s surge? How far could it go?
To find out more about whether or not cryptocurrencies might have a future in the Square Mile, Financial News asked some of the experts for their opinions.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown
“Crypto mania is hard to ignore, as every day more speculators join the hunt for the next stellar success, pushing up prices as they try to spot a winner which will ride the same trajectory as bitcoin. Many crypto coins being pushed into this slot machine of speculation are being sold on the promise of being the great disruptors of the current payments system.
But who will come out on top in the future payments world is still very much a bet, with fierce competition amongst new and more established players as rapid changes rip through the industry. Whereas some coins promise a defined use case, demand is still coming mainly from traders hoping to catch a short ride on a wave of price rises, rather than investing in them over the longer term confident in their development as a means for exchange.
Traders buying in late with expectation of celestial rewards are likely to be sorely disappointed when the price falls back to earth with a bump. Volatility is the name of the game in the crypto world, with coins on a rollercoaster ride from week to week and predicting the point at which demand subsides and prices begin to fall is very difficult, if not impossible.
Investors should treat trading in cryptocurrencies with extreme caution, and dabble at the edges of their investment portfolio, only with money they can afford to lose.”
Adam Grimsley, investment director of private credit at Aberdeen Standard Investments
“The main reason City investors should care about crypto is because it provides the most visible reflection of how technology is shifting the way investors allocate their money. Crypto certainly has caught the attention and imagination of millennials — earlier this year bitcoin hit $1trn in market value after just 12 years, while Apple took around 40 years to hit the same milestone. Apple versus bitcoin is a crude comparison, but both do depend on technological adoption for their value. Crypto looks like it is here to stay in one shape or another.