Cryptocurrency Comes of Age as a Mainstream Financial Asset

Published : 2 months ago, on 21/08/2024

Cryptocurrency is enjoying another bumper year, with Bitcoin more than doubling in value over the past four quarters and several other cryptos including Solana exceeding this performance. 

Despite the high ROI of many alternative assets in the crypto space, the conservative criticism of cryptocurrency persists in many financial circles. But is this still valid given the lengthening track record and appreciation of well-known cryptocurrencies?

In this article, we take a closer look at crypto’s evolution following the 2008 financial crisis and trace its development from a speculative alternative asset to a mainstream payment method and potentially, reserve asset.

Bitcoin revival underscores the credibility of crypto

The investment community prides itself on diversity of opinion, especially when it comes to the acceptance of new assets and innovative companies. Cryptocurrency which came to exist in 2009 with the launch of Bitcoin, is now in its 15th year and shows no signs of disappearing.

Bitcoin in particular has confounded the naysayers even as it takes investors on a roller coaster ride of price movements. The world’s best-known crypto was first minted in 2009 in the wake of the global financial crisis, at a time when confidence in the banking sector was at its lowest in several generations. 

• The concept of a currency that didn’t rely on traditional central bank and treasury backing, and that could be mined and verified via Blockchain by ordinary citizens was an appealing concept in the darkest hours of the banking crisis. 
• At the time, the financial industry paid scant attention to Bitcoin and its founder, the pseudonymous Satoshi Nakamoto, and the asset was valued at less than a dollar for the first few years of its existence.

Fast forward to 2024, and a single Bitcoin that costs less than a dollar is now valued at over $60,000 – a massive return by any measure.

Investors who rely on regular stock trading in conventional financial markets may know that the S&P delivers an average return of 9% per year. However, while stocks may rise slower than crypto, they are less likely to plunge in value. This makes it imperative for investors to balance their portfolios with both asset types. 

Bitcoin has come of its age as other innovative cryptocurrency coins like Ethereum have joined its ranks as alternatives to traditional assets like cash, bonds, and equities.

Looking beyond Bitcoin to the future of the crypto industry

The runaway success of Bitcoin has seen some of its former critics go back on their predictions that the coin would collapse in value and disappear. 

Many old-school financial experts, including the late Charlie Munger, remain steadfast in their caution about using crypto, raising concerns that it’s not backed by the wealth and good faith of a major government. However, younger investors appear to be very comfortable trading and holding cryptocurrency as part of a balanced portfolio.

While the performance of Bitcoin over the years has been exemplary, with current valuations above $60,000, it’s very expensive for the average investor to enter the Bitcoin market today. Additionally, the kind of rapid appreciation that the coin experienced in previous years is unlikely to be repeated.

As a result, traders are actively assessing cryptocurrency advantages and disadvantages to have realistic expectations when entering this market. Factors such as market volatility, regulatory developments, and technological advancements are crucial in shaping the future crypto landscape.

Ultimately, while there will always be a risk of losses when trading any financial asset, as crypto becomes more mainstream the huge price swings seen in recent years may start to mellow and give investors even more confidence in this asset class.

Crypto is now accepted at Ferrari and may become a reserve currency

In a sure sign that cryptocurrency is now a mainstream asset, Italian luxury sports car manufacturer Ferrari recently announced that some coins will be accepted as payment for its top-of-the-line sports cars. 

This decision Illustrates how mainstream cryptocurrency has become, reaching as far as the sometimes-conservative Italian business sector as a trusted store of value.

Perhaps more controversially, US presidential candidate Donald Trump recently speculated that Bitcoin could be used as a reserve currency by the United States. The former president and real estate mogul is a major fan of crypto and is keen for the United States to maintain leadership in the market as competition from China picks up.

These snippets from the news indicate that cryptocurrency has found a mainstream and credible reputation in the international financial industry. This bodes extremely well for the future of an asset class that has huge potential to deliver superior ROI.

Final thoughts

Fifteen years after the initial launch of Bitcoin, cryptocurrency is no longer just an experimental project for Fintech companies. 

Bitcoin and other cryptocurrencies have achieved mainstream status, both in terms of payment acceptance and investor confidence in their ability to create and maintain value, wealth, and value.

As crypto becomes a mainstream asset type, its potential to become a part of every well-balanced portfolio continues to grow. Overall, the future of cryptocurrencies as alternatives to stocks and real estate seems bright.