< Study Room | 02.01.2019

A-Z… the growth of cryptocurrency

A-Z… the growth of cryptocurrency

Nigel Green takes an alphabetised look at digital currencies…

It is becoming impossible to ignore the fact that cryptocurrencies are now part of mainstream finance.

This is evidenced by a rising number of global financial institutions, governments, major corporations and investors now working with cryptocurrencies and their underpinning technology, blockchain.

In addition, the Financial Stability Board has published a report that concluded Bitcoin and other digital currencies do not currently pose a risk to the global financial system.

This October saw the 10th anniversary of the world’s first cryptocurrency and largest by market capitalisation, Bitcoin, a cryptocurrency that forever altered the way the world handles money, conducts business, makes transactions and manages assets.

INCREASING INFLUENCE

The level of influence and sovereignty Bitcoin has could radically change as its moves into its second decade, while the cryptocurrency sector and the broader crypto-asset and digital asset sector are likely to grow by at least 5000% in the next 10 years.

The cryptocurrency market is today worth just over $200bn, which means it could exceed, $10trn by 2028. It is important to note that cryptocurrency is a sub-segment of a broader asset class – ‘crypto-assets’, which itself is a segment of ‘digital assets’.

Crypto-assets generally refer to assets for which ownership is defined by holding a cryptographic private key, and transfer of the asset is done peer to peer by interacting with a distributed ledger – typically a public blockchain, the technology behind bitcoin. Technology now being applied more broadly in enterprise applications, trade and the tokenisation of traditional assets such as real estate and private placements, a market that exceeds $250trn globally.

One principle reason that Bitcoin could lose its amazing dominance of the sector in future is that an increasing number of crypto-assets will be introduced by both private and public sector organisations.

This will subsequently heighten competition for Bitcoin and affect its market share. It is highly probable that Bitcoin will be impacted by greater technology and superior characteristics provided by current and not-yet-released digital currencies in the future.


KNOWING YOUR A-Z

  • A algorithmic
  • B Bitcoin
  • C cryptocurrencies
  • D diversification
  • E exchanges
  • F future
  • G governments
  • H heighten
  • I interacting
  • J just
  • K key
  • L ledger
  • M money
  • N next
  • O organisations
  • P portfolio
  • Q quite
  • R retail
  • S sovereignty
  • T transactions
  • U undoubtedly
  • V volatility
  • W world
  • X eXceed
  • Y years
  • Z amaZing

Move into the mainstream There is a continual, global shift away from fiat money, the pace of which is forecast to accelerate within the coming decade.

Moreover, due to cryptocurrencies and crypto-assets becoming more mainstream, it is not just cryptocurrency exchanges that are generating interest.

Clients, valuing and appreciating their enormous potential, are now demanding actively managed cryptocurrency solutions whereby they can benefit from the potential associated benefits of exposure to the digital currency sector – typically including portfolio diversification and decent returns – but with diminished volatility, via algorithmic trading across different platforms, as well as arbitrage opportunities.

It is becoming increasingly evident that cryptocurrencies now quite rightfully hold their place in conventional finance and, as more major institutional and retail investors, in addition to financial institutions and regulators, acknowledge and understand that cryptocurrencies are the future of money,
we will undoubtedly see fundamental change in the sector by the time Bitcoin reaches its 20th anniversary.

Nigel Green is founder and CEO of deVere Group

 

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