Our report seeks to demystify the world of "cryptos" through the lens of a fundamental investor, and in particular, to help formulate a framework to think about the phenomenon today and in the future.
- Cryptocurrencies have received more attention from institutional investors recently but still face significant barriers to widespread adoption, in our view.
- We introduce an Adoption, Credibility and Environmental sustainability (ACE) framework for evaluating the long-term prospects of cryptocurrencies.
- We also discuss central bank digital currencies, and how they could be introduced alongside cash and bank deposits, without the price volatility of cryptocurrencies.
- For now, we don't see cryptocurrencies as mainstream investment opportunities, although increased ACE may change our views in the future.
- Cryptocurrencies have been gathering momentum, both in terms of adoption and price movements. The Bitcoin price has surged dramatically recently, albeit with high volatility.
- While there are characteristics of cryptocurrencies similar to the traditional investing world – Bitcoin’s similarities to Gold as a diversifier, for example - there are also elements at odds with the traditional investing world.
- We have been advocates of new technologies and behaviours for some time now, and the blockchain phenomenon is a significant example of the increasingly digital world around us. We don't think this phenomenon is going away anytime soon.