Trade wars, Brexit, the Iran crisis: geopolitics is making investors around the world hold their breath. Although the further development or resolution of these three areas of tension was relatively unclear in the middle of May, the interim conclusion of equities as an investment class is a clue: the SMI has posted a rise of about 12% to date in 2019 (editorial deadline: 24.05.2019). On Wall Street, the S&P 500® shows a similarly strong performance. And yet a young asset class has recently stolen the show from the rest of the capital market spectrum. Crypto-currencies have been enjoying a brilliant comeback. Bitcoin is the best known of this innovative form of money, and by some distance the biggest representative when measured by capitalisation. Compared with the US dollar, the leading crypto-currency, abbreviated to “BTC”, has got just over 100% more expensive in the year to date.
To a certain extent, the most recent development recalls the much-quoted “phoenix from the flames”. After all, Bitcoin, and with it the entire crypto-spectrum, had crashed resoundingly to earth in 2018 following the fabled heights flown the year before. Even at the end of 2017 BTC was knocking on the door of the 20,000 US dollar mark. Compared with the then peak, the price collapsed by more than 80% within 12 months. The sell-off had a number of causes, with some dubious operators among the crypto-currencies shooting up like mushrooms from the earth. It was not least the fraudulent activities that persuaded politicians and regulatory authorities to take a closer look. This was exacerbated by the sometimes embittered fight around Bitcoin spin-offs. What were known as hash wars reinforced the loss of confidence in crypto-currencies. Bitcoin started its comeback more or less simultaneously with its 10th birthday. The first block of 50 Bitcoin was created on 3 January 2009. The initiator was “Satoshi Nakamoto” – even today it is not known which person or group is behind this pseudonym. View more information on investment solutions on the topic “Bitcoin & Friends: Return of the crypto-currencies”.
What is known is that Nakamoto created the concept of a decentralised currency on which banks and governments were not to have any influence. For many users and investors, it was this anatomy specifically based on blockchain technology that made the digital money so attractive. In the view of Mati Greenspan, senior market analyst at the social trading platform eToro, Bitcoin has developed in several large waves since then, but there have been repeated huge reversals along the way. “We are standing right at the beginning of the next parabolic cycle”, says the expert of the current speculation on the market. Speaking to the news channel Bloomberg, Greenspan also reckons that trading volumes in crypto-currencies and the associated futures contracts are heading into record territory.
According to the analyst, there is a large and growing community that is engaging intensively with the crypto-currencies. At the same time, current headlines would seem to suggest that there could soon be many new applications. “Microsoft, for instance, has just announced that it wants to use the Bitcoin blockchain in order to improve online security”, Greenspan reports. Facebook is another giant looking to explore this aspect. Unconfirmed media reports suggest that the social media titan is working on its own crypto-currency. Switzerland could play a central role in these plans: Facebook founded a company by the name of Libra Networks in Geneva at the start of May. According to a report by the Handelszeitung business newspaper, the fintech start-up is focusing on payments, financing and identity management as well as big data, analytics and blockchain. While such reports are not being given huge significance in a time dominated by trade wars, Brexit and the Iran crisis, they do suggest that the crypto-currencies are increasingly finding a place among the established investment classes.
View more information on investment solutions on the topic “Bitcoin & Friends: Return of the crypto-currencies”.