Bitcoin is again in the spotlight, surging close to record highs just as the United Kingdom's financial regulator permits professional investors to use crypto exchange-traded notes.
New legitimacy
It would seem that the currency, which was dismissed as a fad, has found new legitimacy following its latest resurgence.
Critics had their ‘told you so’ moment in 2022, when it crashed. At that point, it was volatile and grouped with other unseemly tech stocks.
But it has since recovered in an unprecedented way and this time from a much larger base. It has a market cap of more than $US1.3 trillion ($1.9 trillion), making it more than three times larger than its closest competitor (ethereum).
The Financial Conduct Authority (FCA) has labelled the sector "high risk and largely unregulated", cautioning investors about the inherent risks associated with cryptocurrency investments and the potential for total financial loss.
But the caution didn’t dampen the London Stock Exchange's announcement that it will start accepting applications for the admission of bitcoin and ether exchange-traded notes (ETNs) – perhaps a pivotal moment in the integration of cryptocurrencies into mainstream finance.
And the FCA's recent approval of crypto-backed ETNs for professional investors may be a key step towards legitimising cryptocurrencies and it certainly aligns with the global trend.
Just last year, the United States Securities and Exchange Commission's (SEC) authorised the first US-listed bitcoin exchange-traded funds (ETFs), which offered eager investors a structured avenue to gain exposure to the asset.
Soaring price
Critics and advocates alike recognise the extraordinary rise of bitcoin's value, with the cryptocurrency's price soaring more than 70% from January, reaching in excess of $108,000.
And for all the salutary tales of loss and ruin, there are always the stories of investors who have made a killing – including one Melbourne resident who told the ABC he’d gone from purchasing $900 worth of bitcoin in 2017 to now having holdings close to a staggering $100,000 in value.
The investor spoke of the ease and rapidity with which one can liquidate bitcoin positions.
This surge challenges traditional financial paradigms, as bitcoin, unlike other investment bubbles, has not only recovered from previous setbacks but has also established new valuation benchmarks.
It would seem the narrative has evolved, with august institutions hopping on the bandwagon and more traditional investors being persuaded each day.
And yet scepticism persists, fuelled by concerns about the long-term viability and regulatory landscape for this still-new digital currency.