- Cryptocurrencies’ growth into a trillion-dollar market shows that there is more to it than a fad.
- Ideas of cryptos being private money and a platform for decentralized applications support demand.
- Bitcoin halving in mid-April is supporting interest, alongside continued inflows into Bitcoin ETFs.
- Ethereum’s scalability has improved, but SEC questions on Ether remain an overhang.
Cryptocurrencies: The rise of an asset class
Cryptocurrencies, or virtual currencies on a decentralized blockchain, are by now well-known. Their volatility, however, remains high compared to when they first entered global consciousness about half decade ago. Given a lack of intrinsic value and failures of poorly regulated crypto exchanges, perceptions of cryptos as risky assets are mostly unchanged.
Still, a case can be made that cryptocurrencies are no longer a fad or a mere offshoot of financial repression. After years of rising trading volumes and with a combined market capitalization averaging USD1trn over the last three years, cryptocurrencies have stood both the tests of time and high interest rates. Crypto market valuation is by now larger than the Asian ex-Japan corporate USD bond market, and crypto trading volumes in Korean exchanges recently matched volumes for the KOSPI market. High market capitalization and sustained trading interest qualify cryptos as an emerging asset class, even if their utility and pricing theory are not well-developed. But what do markets see in cryptocurrencies exactly?
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