Cryptocurrencies are riding high at the moment – in two senses of the word. Not only is Bitcoin (BTC), for instance, the oldest and by far the most popular cyber currency, rushing from one record to the next, but it has now also attracted unprecedented attention across all social strata. Indeed, Bitcoin is increasingly being talked of as a substitute for gold. It's hardly surprising, then, that many investors are looking to share in the ascent of BTC. This high demand for the digital currency has caused Bitcoin to appreciate by a huge 750 per cent over the last twelve months, even cresting the USD 60,000 mark. BTC is not by any means the only internet currency, though, that is finding itself hitting the heights at present. The second most important cyber currency, Ethereum, likewise recently reached a new record level of over USD 2,000, for instance. According to CoinMarketCap, in all more than 4,500 cryptocurrencies with a market capitalisation of some USDtn 2 are being traded around the globe at the moment. Bitcoin accounts for 56 per cent of this total alone, Ethereum 12 per cent.
One reason for this rising dominance is the increasing acceptance of cryptocurrencies. Just recently, for example, the two financial giants PayPal and Visa opened the door to cyber currencies as a means of payment. Credit card provider Visa started the use of USD Coin with the Crypto.com payment and crypto platform. This is what is known as a Stablecoin cryptocurrency, which is based on the Ethereum blockchain technology. "We see increasing demand from consumers across the world to be able to access, hold and use digital currencies," says Cuy Sheffield, head of Visa's crypto department, explaining the move. At almost the same time, US payments processor PayPal was giving the green light to paying with cryptocurrencies. Anyone owning Bitcoin, Ether, Bitcoin Cash or Litecoin will in future be able to convert them into traditional currencies such as the dollar in order to pay for goods bought online, for instance.
It is not only financial companies that are increasingly turning to Bitcoin and the like – large corporate groups are themselves now investing in digital currencies. To give an example, American electric car manufacturer Tesla poured USDbn 1.5 into BTC at the start of the year. Similarly, the two software houses Square and MicroStrategy took advantage of a setback in February to boost their holdings further. The latter put somewhat more than USDbn 1 on the table for another 19,452 bitcoins. This means MicroStrategy now has an equivalent in BTC of around USDbn 2.2. That is far from being the end of the investment for CEO Michael Saylor, however: "We will continue to pursue our strategy of acquiring Bitcoin with excess cash." Tesla boss Elon Musk shares this view, is likewise seeking to increase his BTC investment again and will accept the cryptocurrency as a means of payment in the future. "You can now buy a Tesla with Bitcoin," Musk tweeted on 24 March.
Investors have similarly long since discovered cryptocurrencies as an asset class. In the first quarter professionals invested more money than ever before in digital payment means. According to asset manager CoinShares, inflows from institutional investors over the last three months climbed to USDbn 4.2 from USDbn 3.9 in the previous quarter. That means over 60 per cent of the volume of the whole of 2020 has already been invested in cryptocurrencies since the start of the year. More than three quarters of the money flowed into Bitcoin, with Ethereum accounting for a 17 per cent share in second place. All in all, total assets under management in cryptocurrency funds have now reached a hefty USDbn 55.8.
Source: CoinMarketCap
View more information on investment solutions on the topic “Cyber currencies conquer the world”
