There is no denying that cryptocurrency has become mainstream. The total value of all cryptocurrencies in circulation is over $2.2 trillion, with bitcoin accounting for about $920 billion of that total.
Ether’s price has more than quintupled this year, from about $730 per coin to nearly $4,000.
“The next potential step is to launch additional ETFs for other currencies. There will likely be an ETF in early 2022,” said Nick Elward, Senior Vice President and Head of Institutional Products and ETFs at Natixis Investment Managers. “There will likely be an ETF in early 2022.”
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Many investors flocked to bitcoin in 2017 and saw prices rise from around $1,000 per coin to just under $20,000 by December of that year.
Then came the crash, with bitcoin dropping to around $3,500 by the end of 2018. These prices clearly recovered — and then some — but it took until December 2020 before the coin retraced to the $20,000 level.
These sudden fluctuations in cryptocurrency prices are likely to continue. The key, experts said, is for investors to learn to endure and weather the inevitable ups and downs.
“We have noticed a correction in the market more than once,” Anton Chachin, managing partner at Bitfrost, a digital asset service provider, said in an email to CNN Business. “If institutional investors start taking profits, that could have a ripple effect.”
But he added that these large companies will likely continue to flock to bitcoin as a potential hedge against inflation and rising interest rates, which could hurt government-backed traditional currencies.
“Even if the source of institutional investors’ concern is the fear of missing out on opportunities (FOMO), all institutional decisions were made after careful consideration. These companies have come to realize the potential benefits of cryptocurrencies,” Chachin said.
The increased adoption and legitimacy of cryptocurrencies is also likely to help mitigate some of the volatility. Prices may continue to move sharply, but the shifts may not be as violent as the past few years.
“Having bigger institutions with deeper pockets and firmer hands to buy crypto would help,” said John Wu, president of Ava Labs, the ethereum-compatible blockchain company. “They can handle ups and downs.”
Elward of Natixis Investment also believes that more fund managers will be looking closely at cryptocurrencies, potentially skipping passively-functioning bitcoin ETFs that simply reverse the trend of bitcoin futures.
“Active makes sense for crypto investors,” Eluard said. “I expect more managers out there analyzing which one is more suitable to buy.”
He added that cryptocurrencies are a natural extension of the so-called alternative investment realm, a group of assets beyond stocks and bonds that typically include gold and other precious metals.
Along these lines, some experts believe that ether and the third most valuable cryptocurrency in the world, Binance, could continue to gain market share against bitcoin.
“You have to look at the utility of cryptocurrencies,” said Alex Limberg, CEO of Nimbus, a decentralized finance lender. “Ether could eventually be bigger than bitcoin. They are NFT bars.”
Wu, of Ava Labs, also believes that investors will overtake Bitcoin.
“We expect more fragmentation in the crypto world,” he said. “Pricing will move more based on adoption.” “Cryptocurrencies will not trade side by side to the same extent.”