By Nic Reimer
The Cryptocurrency market and Key fundamentals to keep in mind.
Introduction:
Cryptocurrency has continued to gain popularity over the years, attracting investors due to the large potential returns and financial autonomy. Institutional adoption by companies like Tesla and PayPal has further legitimized crypto as an investment. In addition, regulatory adoption and clarity like Markets in Crypto-Assets Regulation (MiCa) in the United Kingdom, the Virtual Assets Regulatory Authority (VARA) in Dubai and closer to home, the inclusion of crypto assets in FAIS and the requirement for all Financial Service Providers to have a CASP licence to provide crypto services is helping to provide clarity where previously there was none.
Inflation concerns post the Global pandemic led many to view Bitcoin as a hedge against currency devaluation. Additionally, the accessibility of crypto trading, 24/7 market availability, and the rise of decentralised finance (DeFi) have attracted a growing number of retail and institutional investors. As more businesses, governments, and individuals recognize the benefits of digital assets, cryptocurrency continues to establish itself as an asset class that should not be ignored.
The current market landscape
In 2024 the US Securities and Exchange Commission approved the listing of several Bitcoin and Ethereum ETFs, enabling much wider regulated access to the asset class by retail and institutional investors alike.
More recently, the Trump administration has had a significant impact on Crypto prices. Over the past four months, Bitcoin, the largest crypto asset by market capitalisation, has experienced significant price appreciation. On 31 October 2024, Bitcoin closed just over $70 000 per Bitcoin in the lead up to the United States election.
As of 4 February, its price has risen to just over $100 000 per Bitcoin, marking an increase of about 41%. President Donald Trump has played a significant role in the asset class increase, pivoting to a favourable stance on crypto in general, even launching non-fungible tokens (NFTs) and his own meme coin $TRUMP, and including Elon Musk, another crypto enthusiast, in his administration.
What is the investment appeal?
Despite the volatility within the asset class, the following factors appeal to investors:
What should you consider?
Like any investment, analysing the fundamentals is key to achieving success. Unlike shares, Crypto assets do not have financial statements to analyse; however, there are other metrics to keep in mind:
In closing:
With the increase in popularity of Cryptocurrencies, it's important to understand the asset class as an investor and gain exposure in the correct manner. Crypto has proved that it is here to stay and with it comes opportunities for investors to benefit. Like all investments, don't bet the house on a single asset class no matter how tempting, rather invest in a basket of assets. Stick to the fundamentals and stay the course with your investment strategy. Only change positions if fundamentals have changed, not heightened volatility.
FNB Stockbroking and Portfolio Management (Pty) Ltd, a subsidiary of FirstRand Bank Limited, an authorised Financial Services Provider and authorised user of the JSE limited (Reg no: 1996/011732/07). This Publication note is issued by FNB Stockbroking and Portfolio Management (Pty) Ltd for the information of clients only and should not be produced in whole or part without prior permission. Although FNB Stockbroking and Portfolio Management (Pty) Ltd is an Authorised Financial Services Provider, any opinions and/or analysis contained in this Publication are for informational purposes only and should not be considered advice, including but not limited to financial, legal or tax advice, or a recommendation to invest in any security or to adopt any investment strategy. The information contained herein has been obtained from sources/persons which we believe to be reliable but is not guaranteed for correctness, completeness or otherwise and we do not assume liability for loss arising from errors in the information or that may be suffered from using or relying on the information contained herein irrespective of whether there has been any negligence by us, our affiliates or any other employees of us, and whether such losses be direct or consequential. As market and economic conditions are subject to rapid change, any comments, opinions, and analysis is rendered as of the date of publishing and may change without notice. Such changes may have a material impact on the outcome of any investment. Securities involve a degree of risk and are volatile instruments. Past performance is not indicative of future performances. Securities or financial instruments mentioned in the Publication note may not be suitable for all investors and FNB Stockbroking and Portfolio Management (Pty) Ltd has bares no responsibility whatsoever arising from or as a consequence hereof. The material is not intended as a complete analysis of every material fact regarding any share, instrument, sector, region, market, country, investment, or strategy. The recipient of this Publication must make their own investment decision and is advised to contact his relationship manager for a personal financial analysis prior to making any investment decisions. Copyright 2018 by FNB Stockbroking and Portfolio Management (Pty) Ltd.
