Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
A week is a very long time when it comes to cryptocurrencies. On Monday Bitcoin and several others crashed, wiping nearly $200 million off the crypto market. They’ve been back up - and now gone down again. The volatility hasn’t been helped by the fact that China has just banned all cryptocurrencies. Why is not known, but the effect is plain to see.
With gyrations like this you might think bitcoin and the like is for spivs, kids and the not-so-faint hearted. Apparently, the cryptocurrency is starting to fall out of favour with institutional investors, with ether derivatives the new kid on the block, according to investment bank JP Morgan.
Even without knowing any more about bitcoin than its name, as an investor, when you read a sentence like that you get the sense that cryptocurrencies are moving into the mainstream. And as the saying goes, knowledge is power.
There’s always plenty in the news and especially on social media about bitcoin and cryptocurrencies in general. Past the ‘get rich quick’ headlines, the big question is what role all of this has and what you need to know as an investor.
There’s no denying that crypto is here to stay and is getting more mainstream by the day. But that doesn’t mean it is not without its faults.
Top of the list is the issue of sustainability. While mining/creating new cryptocurrency is virtual, it has a real-life impact. Utilising banks of super computers running strings of complex calculations to generate currency uses massive amounts of electricity. Generating more CO2 emissions than Singapore, the trend is to locate these sites in countries where power is cheapest and, unfortunately, that tends to mean in countries where planet-friendly emission targets are not really an issue.
Another big issue is whether it’s credible from an investment point of view at all. A level of volatility is a given when it comes to investing, but when it comes to cryptocurrencies, that volatility is next level.
Then there is the large influence of social media on financial markets that is amplified when it comes to cryptocurrencies. You may not know exactly who Robinhood is or what has been going on but you’ve probably heard of it. And Gamestop.
All those day-traders talking on discussion boards and the role of crypto and meme stocks has shades of the dot.com boom and bust - but the speed at which these cryptocurrencies move is magnificently and dangerously amplified by 21st social media - the like of which just didn’t exist back in the early days of the Noughties.
That doesn’t seem to be scaring off the ‘Establishment’ though. Renowned auctioneer Christie’s is all over CryptoPunk. It’s just the place if you want to buy your own piece of the digital art market. As for Robinhood, thanks to social media and those meme stocks it has signed up millions of new users this year alone, and its latest earnings report reveals crypto made up over half of its transaction-based Q2 revenue. It’s not on a whim then that it’s beginning to rollout a crypto wallet, which will enable users to own and freely use the currency, rather than being confined to trading it within Robinhood’s domain.
Volatile, unpredictable and with the potential to make or break investors, crypto’s not going away any time soon.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.
Share this article
The quickest way to reduce your carbon footprint today
Putting pension savings on a green footing is 21 times more powerful than oth…
Can the Domino’s Pizza share price continue to recover?
Collections up as delivery growth slows