Cryptocurrency’s rise has prompted fears of a massive speculative bubble that is bound to burst with ruinous consequences, but an industry professional says such dire warnings are premature, if not off the mark.
“I believe it is too early” to call the virtual currency phenomenon a bubble, said Jasper Lee, CEO of the Asia Pacific operations of eToro, a social trading platform that facilitates crypto investments.
Lee added that he remains bullish in the crypto market despite the recent slump.
“If the market moves on a favorable path in 2018, I believe cryptocurrency has the power to upend traditional financial systems in five to ten years,” he told EJ Insight.
“Many more institutions will hold crypto assets in their portfolios, more businesses will raise funds via ICO-like ways, and many more governments will explore the application of cryptocurrency, just like the US and Japan authorities today,” Lee said in an exclusive interview recently.
The industry professional is optimistic about the prospects of cryptocurrencies in China despite a nationwide crackdown by authorities on some activities since last year.
“Chinese businesses are investing huge sums into blockchain, the underlying technology of cryptocurrency. And given the high adoption of mobile payments in the country, I would not be surprised if tech giants like Alibaba and Tencent will soon issue their own crypto usage tokens which will leverage the firms’ established mobile payment infrastructure,” Lee said.
Though virtual currencies have had a rocky ride in 2018, they are still up several-fold in terms of their value compared to two years ago.
Bitcoin has surged by over 33-fold in last two years, while the other two major cryptocurrencies, ethereum and ripple, have seen their values skyrocket 76-fold and 165-fold respectively.
As of end-January this year, top five cryptocurrencies has a market capitalization of over US$10 billion.
Bitcoin and other cryptocurrencies have been the hottest topic among investors and within the financial sector. With the spreading hype, many leading virtual currency exchanges have struggled in dealing with an abrupt surge in new customer accounts.
“There has been a spectacular increase in retail investor activity in the crypto field,” said Lee, “but still, a lot of investment banks and institutional investors are wary of dealing with unregulated entities.”
He believes the futures contracts that launched on CME and Cboe will help lure big institutional players into the segment.
“Many more big investors are coming in 2018,” which will drive the market on to further growth path, according to the eToro executive.
With bitcoin, the largest cryptocurrency by market cap, facing turbulence this year, investors are looking at other crypto tokens, such as ethereum and ripple, helping the units post decent gains before the latest broad market selloff.
Looking ahead, Lee believes bitcoin’s dominance of the cryptocurrency market will continue to decline.
Thanks to the rise of other crypto units, bitcoin’s market cap now accounts for only around 37 percent of the total value of all cryptocurrencies, compared with a share of over 80 percent at the start of 2017, according to Coinmarketcap.com.
“This illustrates a healthy development of the market. It is no longer relying on bitcoin to grow,” said Lee. “Even if bitcoin stalls, ethereum, ripple, and other tokens can still move forward.”
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