The unprecedented growth of cryptocurrency trading

While many folks in the UK are fixated on Brexit negotiations and how they will impact the GBP and the FTSE 100 index, markets are waking up to a new reality: cryptocurrency.

Those in the know have been following digital currency since inception in 2008, when Bitcoin exploded onto the scene. For the rest of us, Bitcoin gained prominence in 2016, and its unprecedented growth continued in 2017.

Once again, traders and investors caught the tail end of the Bitcoin boom and are now looking to cash in when the price is trading around $4,500 – $4,700 per unit. In GBP, that translates into approximately £3,488 – £3,643. This is especially notable given the price of BTC (Bitcoin) at the start of 2017 – approximately $900 or £697. Market participants are still fixated on Bitcoin, but there is another cryptocurrency making significant headway with its superior blockchain technology and peer to peer capabilities – Ethereum.

What is Ethereum?

What is Ethereum

Ethereum, like Bitcoin, runs on a decentralized network and provides smart contracts for transactions purposes. These contracts are computer programs which instantaneously execute contract conditions once an event has occurred. There are no breakdowns in performance, no delayed payments, and significantly diminished risks involved with smart contracts. Beyond its smart contract capabilities, Ethereum runs on blockchain technology.

This continuously growing database is ironclad. It cannot be hacked or tampered with. If a single node becomes corrupted, the blockchain will not be compromised. Designed as a fully decentralized system – much like the Internet was intended to be, Ethereum is one of the most exciting digital currencies currently on the market. The Ethereum wallet opens the door to decentralized applications, making it easy to use digital currency to pay for things, transfer money etc.

While Bitcoin is traditionally regarded as the gold standard with cryptocurrency, it is but the first of many major digital currencies that currently exist. Based on pricing, market capitalization and distribution elements, Bitcoin, Litecoin and Ethereum rank as follows (pricing as at August 30, 2017):

  • Bitcoin is priced around $4553, with a market capitalization of $75.276 billion, and a circulation supply of 16,533,062 BTC
  • Litecoin is priced around $62, with a market capitalization of $3.286 billion, and a circulating supply of 52,702,007 LTC.
  • Ethereum is priced around $377, with a market capitalization of $35.589 billion, and a circulating supply of 94,329,554 ETH.

Ethereum began trading at $7.98 on 1 January 2017, and gained $370 in 8 months. That represents a 4661% appreciation in price – far greater than Bitcoin’s rise from approximately $900 to $4,700 in 2017. In terms of return on investment, the star performer is not Bitcoin, it’s Ethereum.  While these pricing considerations can fluctuate wildly from day-to-day, the general trend has been strongly bullish.

How Popular is Ethereum in the UK?

Investments in Ethereum take the form of tokens. These are different to investments in shares where shareholders receive shares (a small fraction of ownership of the company). All Ethereum transactions are anonymous, thanks to smart contracts and decentralized apps. Ethereum is well known in the United Kingdom, and ranks second to Bitcoin as the most popular cryptocurrency. The price of Ethereum is approximately 8.5% of Bitcoin’s price, but it’s a rate of growth is substantially higher than that of Bitcoin.

This means it is highly desirable for investment and trading purposes, given its huge returns. In terms of value investing, it’s a no-brainer between Bitcoin and Ethereum: ETH trumps BTC hands down. There has been a significant uptick in UK trading activity with Ethereum, in line with general market trends with this digital currency. Several important events are driving the price rise in cryptocurrency, notably regulation in South Korea, and tensions with North Korea. As long as market participants perceive digital currency as a go-to option during times of uncertainty, they will continue buying into it.

Jonathan Sumner

Jon Sumner

Jonathan was the Director of Digital & Social Media at Bonhill Group plc until 2020 before moving on to become Chief Digital Officer at GRC World Forums.

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