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Is it game over for Bitcoin? That is increasingly what it looks like as seasoned cryptocurrency traders report more interest by social media users in some of its rivals, most notably XRP (Ripple). Bitcoin had an amazing year in 2017, and this time last year it was all any traders seemed able to talk about. But hopes that a Bitcoin ETF would see the currency move into the mainstream have proved ill-founded.

Looking at the technicals for XRP and it is a different story entirely: XRP completely outperformed Bitcoin in percentage terms in 2017. It rose a staggering 33,493% during the course of the year. It has also been helped by the cushion that was provided in the run up to the X-rapid release in late September.

Cryptocurrencies – are they an investment?

Digital currencies are intended first and foremost as a medium for the exchange of value. The problem is some people are looking at the same as an investment – or think they should serve as one – while others would like to trade digital currencies like other currencies.

Bear in mind that many mainstream currencies have been around for centuries, and are backed by governments and large, easily definable economies. They are regulated by central banks.

Part of the interest in XRP, for example from banks, has been in its utility as a cheaper inter-bank payment system. The banks are less concerned about Ripple’s value as an investment. Sure, you can buy into Ripple if you have faith in its future, but don’t complain about the price volatility.

Can a Bitcoin ETF save the struggling market?

Many fans of cyptocurrencies are holding out hope that exchange-traded products like ETFs will signal a more widespread acceptance of cryptocurrencies. Switzerland has allowed the listing of an ETP (exchange-traded product) on its central securities exchange, SIX. Called the Amun Crypto Basket, this exceeded the volumes of all other ETPs listed on the SIX on 26 November.

But will this herald the arrival of the hoped for Bitcoin ETF? The SEC is currently talking down hopes of one in the near future, citing concerns around the lack of any real supervision of cryptocurrency platforms. SEC boss Jay Clayton said at a conference last month that he did not expect to be signing off on a crypto ETF any time soon.

Van Eck goes into bat for Bitcoin

There are also ongoing concerns over how easy it still is to manipulate a crptocurrency – a small group of people can still have a massive impact on the price of a given crypto. ETF manager Van Eck and the CBOE, currently the leaders in getting a possibly ETF launch in this market, have met with the SEC and run it through a long presentation, outlining the arguments for a listing.

Van Eck is arguing that the Bitcoin is resilient and tightly linked to the futures market, and has also made the usual arguments about the CBOE’s own infrastructure. But none of this seems to address Clayton’s own concerns. To get a Bitcoin ETF launched, the SEC’s worries about what we’d called the immaturity of the market need to be addressed.

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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