Latest: what’s going on with cryptocurrencies?

Are you a crypto sceptic or a bitcoin convert? If the price of the leading digital ‘coin’ is any guide, investors are increasingly joining the latter camp.

Earlier this month, the price of bitcoin, the first and most important cryptocurrency, reached a record high of $126,223 (although it has since fallen back to $115,526 at the time of writing). Ten years ago, the price was just $294; the 429-fold rise between then and its recent record represents a spectacular investment performance by any standard. Please remember past performance is not a reliable indicator of future returns.

Just as striking is the fact that the value of all cryptocurrencies – in other words not just of bitcoin but the combined value of all digital ‘tokens’ including bitcoin rivals such as Ethereum – surpassed $4 trillion this summer, according to CoinGecko, a cryptocurrency website. That figure is not far short of the value of the world’s most valuable company, Nvidia. 

Here we offer an introduction to the world of cryptocurrency and list some of the key recent developments. We intend to keep this page updated regularly as the sector evolves. Sign up to our Pulse emails to be reminded of updates. But before today’s summary of the latest developments, here are the basics…

What are cryptocurrencies?

A cryptocurrency is an asset anyone can own that exists only in digital form. Every transaction is recorded and made public, although users are anonymous. The transaction records are maintained in numerous locations on the internet and in accordance with strict protocols, which – in principle at least – ensures that the records are unerasable and unhackable. 

The original idea was that bitcoin, the first cryptocurrency, would function as money and be used for everyday transactions, although in practice it has been used more as a vehicle for speculation and a store of value. Some bitcoin holders see it as ‘digital gold’ because only a finite number of bitcoins can ever exist, so its value is backed to some extent by scarcity. Its independence from any government, company or organisation also appeals to some users. Many other cryptocurrencies work on broadly similar lines.

What are stablecoins?

Bitcoin and many other cryptocurrencies are not ‘backed’ by another asset and do not represent any other asset – they exist only in themselves and have acquired value simply because people have wanted to own them and have been prepared to part with money in order to do so. But certain other cryptocurrencies do represent an asset, typically the US dollar. They are called stablecoins because their value is tied to that of the other asset and therefore does not fluctuate in the way bitcoin and others do. A dollar stablecoin will be backed on a one-to-one basis by US dollars or American government bonds.

What are the pros of investing in crypto?

As we said, a cryptocurrency (at least one that isn’t a stablecoin) is not under the control of a government or central bank. This is seen as a positive by some investors who fear that governments or central banks may deliberately stoke inflation – in other words, make money less valuable – as a means to get government borrowing under control. Central banks can encourage inflation (or at least be indifferent to it) if they create money in large quantities. 

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As we mentioned, the ability to create certain cryptocurrencies, most prominently bitcoin, is limited: it cannot be ‘printed’ at will in unlimited quantities in the way conventional currencies can. Savers who fear debasement of currencies such as the pound or dollar may therefore see owning the likes of bitcoin as a way to preserve their wealth. There is, however, no limit on the creation of ethereum, another popular digital coin. 

We must acknowledge that another attraction of the likes of bitcoin is simply that its price has risen spectacularly since its creation. Many investors buy it in the hope that such price appreciation will continue, something that is far from certain. Indeed, the purchase of any asset solely in the hope that it can be sold for more is often called the ‘greater fool’ approach as it relies, according to proponents of that view, on the existence of an even more foolish investor prepared to pay an even more inflated price.

And what are the cons?

Crypto is a relatively new invention (the first bitcoin was created in 2009) and some think it could still prove a passing fad. Many are suspicious of an asset that has no support from an existing trusted body such as a long-established government or bank. Others doubt that the technology that underpins crypto is as secure or robust as claimed. There are even fears that new types of computers, such as quantum computing, could crack the encryption that lies at the heart of bitcoin and its rivals, thereby compromising their value. A huge number of cryptocurrencies have been created on the coat-tails of bitcoin and is it questionable how many can survive; plenty have already failed. Most cryptocurrencies have displayed extreme price volatility, to the extent that many analysts regard owning them as an exercise in gambling rather than investment.

Now for the latest crypto developments…

UPDATE No 1: Private savers are now able to invest in crypto via funds

Until a few days ago, individual investors in Britain, unlike their counterparts in America and some European countries, were not allowed to buy funds that track the price of bitcoin or other cryptocurrencies. But in early October the City regulator lifted the ban on the sale of crypto funds to private savers in Britain¹. Since then, investment platforms have been free to offer such funds (which are ‘exchange-traded notes’, a cousin of the more familiar exchange-traded funds or ETFs) to individual investors. Crucially, these funds can be held in ISAs and SIPPs. 

UPDATE No 2: US seal of approval for ‘stablecoins’ could boost crypto

President Trump has approved a bill to create a regulatory framework for stablecoins pegged to the America dollar². In Britain, by contrast, the Governor of the Bank of England played down the chances of an official stablecoin or cryptocurrency for the UK. Andrew Bailey said he would need ‘a lot of convincing’ to back such a coin. He also warned against allowing major banks to issue their own stablecoins.

Analysts said the new US legislation offered legal certainty, which is important for institutional investors and could encourage more of them to buy crypto for the first time.

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How ISA and SIPP savers can invest in crypto

You can invest in cryptocurrency within your ISA or SIPP, but only indirectly; you cannot hold bitcoin or other cryptocurrencies directly within these tax-advantaged accounts.

More details are available in my other article Can I invest in cryptocurrency within my ISA?, but here is a summary of some investment options:

• The iShares Blockchain Technology UCITS ETF, which is an exchange-traded fund bought and sold on the stock market
• The VanEck Crypto and Blockchain Innovators ETF
• Shares in Strategy, the ‘bitcoin treasury’ company mentioned above
• Shares in Coinbase, a cryptocurrency broker

Remember that cryptocurrencies are a relatively new invention and have yet to be used as money on an appreciable scale; instead, they have been used largely as a means of financial speculation. Unlike many conventional investments, they also generate no income.

As a result, there is little objective support for their value and more reason to expect a reversal of recent price rises in tokens such as bitcoin. At the very least, volatility in their prices should be expected. Regulators have warned that buyers of crypto should be prepared for the entire loss of their investment. You may therefore wish to consider making any investments in crypto-related assets only a small proportion of your portfolio.

Fidelity is exploring options to make cryptocurrency ETNs available on the Personal Investing platform. To stay up to date with our latest content and Fidelity product developments, sign up to our Pulse emails. 
 

Source:

¹ FCA.1.8.25
² The White House. 18.7.25

• Read: Can I invest in cryptocurrency within my ISA?
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