Interest in cryptocurrencies has spiked once again this week, following the latest announcement from US regulator the Securities and Exchange Commission (SEC).
With certain Bitcoin ETFs now approved by the US regulator, many are hoping the move will bring some much-needed legitimacy to the cryptocurrency. There are also hopes it will lower trading costs and improve liquidity.
Demand does appear to be there, with the price of Bitcoin increasing dramatically on the announcement.
However, sceptics will argue there is reason to be wary, particularly with the nature in which the news came about.
Earlier this week, a post on X – formerly Twitter – from SEC’s account said a Bitcoin ETF had been approved. Immediately after, there was a spike in the price of Bitcoin, but this was short lived as SEC quickly said its account had been compromised and the announcement had not been authorised.
Then, just a couple of days later, the official announcement was made.
Despite this confusion, the appeal of crypto is evident to many. With Standard Chartered predicting Bitcoin could hit $200,000 by 2025, some would argue it is difficult to not invest.
However, others – including myself – are left a little confused. The potential upsides are obvious, but there are certain problems that are hard to separate from digital assets.
Firstly, and I may be thinking too inside the box, but I struggle to see how you can place a price on an asset that essentially has no intrinsic value. Clearly, people disagree, but what factors would you use to decide whether Bitcoin is over or under valued, for example?
Moreover, investing in cryptocurrencies is a very energy intensive process. There is a lot of research that points to us becoming more environmentally-conscious and focused on sustainability, which seems to be at odds with the continued growth and interest in crypto.
Will investors look to offset these emissions through other holdings in their portfolios or perhaps make lifestyle changes to account for this increased energy usage?
The regulation beginning to enter the sector perhaps will help alleviate concerns about scams and fraud, but for now, this is still a fear for many too.
From my perspective, there is no easy answer to any of these questions. Both the sceptics and supporters have valid points. There is money to be made and lost.
Arguably it comes down – like so many wealth management decisions do – to understanding purpose and risk appetite.
