Jens Nordvig, founder and CEO of Exante, the “Next Generation Investment Company”, recently told CNBC that “Cryptocurrency trading volume is now more than of $3bn/day on average, and will likely soon surpass that of the world’s most liquid stock: Apple ($4bn/day).”
Despite a recent decline in value due to regulatory issues in China, Bitcoin is up more than 800% from its valuation a year ago. Analysts who have a good understanding of the technology behind Bitcoin and other cryptocurrencies see a bright future for cryptocurrency, although (like Nordvig) they don’t necessarily see any specific cryptocurrency actually becoming a replacement for traditional currency.
Said Nordvig:
“We do not believe that one can predict with confidence at this point that any given cryptocurrency will continue to thrive and gain status as an alternative to traditional currencies in the long term, but we look forward to using the information from an increasingly active cryptocurrency market in our tracking of global capital flows, when appropriate.”
Coins as Settlement Layers: Cryptocurrencies Have More Than One Path to Success
Nordvig’s skepticism when it comes to Bitcoin or any other cryptocurrency replacing fiat is not completely unfounded; such a transition (if it were to occur) is certainly still years away. However, not all cryptocurrencies are suited to the sole purpose of acting as a form of digital cash.
In fact, many newer cryptocurrencies (ie Ethereum and Lisk) have been created as settlement layers. These settlement layers are then used as the basis for the development of decentralized applications and even other cryptocurrencies.
As these settlement layers become more widely adopted across various industries to create dapps and other altcoins, their token values increase. Users buy and hold the tokens mainly as a form of investment rather than an “alternative to cash”. In other words, the increasing value of cryptocurrency no longer depends on whether or not it is in fact adopted as digital cash–there are many other ways that a coin can gain value.
That being said, it’s difficult to know which coins will be the ones adopted for more mainstream use. While choosing coins that have great software, great development teams, and high-profile investors certainly can’t hurt, nothing in the highly volatile world of crypto is guaranteed.
Venture Capital and Investment Companies Turning to Crypto
Nordvig’s company, Exante, is most known for its “Multiproduct Platform”, a trading network that handles digital assets, fiat currencies, traditional assets, and metals. Exante officially announced that it would be adding the option to trade cryptocurrencies in July of 2017, and currently offers Ripple, Monero, Ethereum, Zcash, Litecoin, and (of course) Bitcoin. Exante also runs a Bitcoin hedge fund that boasts outrageous returns–in 2016, their numbers hit 4,4847% in returns; so far in 2017, the returns have been over 10,000%.
These eye-popping numbers are not unique to Exante. Polychain Capital and MetaStable are similarly known for their previously-unheard-of returns on venture capital and hedge funds.
While Exante, Polychain Capital, MetaStable may be early adopters to institutional investment in cryptocurrency, Hedge Fund Alert reported earlier this year that more than fifty such funds are in the works from various investment firms, including Arthur Bell, Cole-Frieman & Mallon, and MG Stover & Company.
Changes in the Global Assets Landscape
The increased interest in large-scale institutional cryptocurrency investment comes in the midst of widespread change in the global culture of investment. In August, as the cryptocurrency trading volume was reaching its highest historical levels, the stock market was hitting its lowest point in three years.
The low levels of the stock market can be attributed to several factors. Mark Zandy, chief economist at Moody Analytics, said in August that one reason for the decline is that the stock market is exiting a period of being overvalued; he added that market investors should “buckle in” as the market continues down the path of possible long-term correction.