revenge of the hodlers

Revenge Of The Hodlers

Politicians are joining the party Donald Trump is appointing pro-crypto officials, eyeing a bitcoin reserve and even hawking his own coin. So are punters, who are trying their hand and losing their shirts in the risky meme coin market. Like the 18th-century carnival of Rome attended by the poet Goethe - where all mad and foolish behaviour save for knifing and brawling was allowed - it's the mystified tourists who are in the minority.

Right now, it's Anthony Scaramucci of all people whose analysis makes the most sense bitcoin's new milestone shows it's gained wider acceptance as a tradeable asset and portfolio investment, offering both big gains and gut-wrenching drawdowns the last peak-to-trough fall after Covid-19 was around 76.

The flipside of having no intrinsic value and a decentralised architecture with a huge energy footprint means that nobody's using bitcoin to buy their groceries, though only 7 of US consumers hold bitcoin, according to Deutsche Bank research, and a survey published last month by the UK Financial Conduct Authority found only 16 of people who owned cryptocurrencies used them for payments. Sceptics focus on the lack of real-world adoption - yet it's speculators banking on so-called digital gold who've come out richer.

Another point in HODLers' favour going into 2025 is betting on the power of the incoming US president - somewhat ironically for a movement originally forged by libertarian cypher-punks. Almost 10-billion has flowed into bitcoin exchange-traded funds since Trump's 5 November US election win, which makes sense given the likely gains to be had from regulatory forbearance.

The second is whether there is already a glimpse of a future financial system beyond the speculation. Complex systems take time to emerge - something crypto doubters might also miss. Maybe new experiments, such as First Abu Dhabi Bank and Libre Capital's announcement this week of a stablecoin-lending pilot backed by tokenised money-market funds, are the budding indicators of where this Wild West of digital trading might end up.