The rise of cryptocurrencies like bitcoin and Ethereum has been a sight to behold this year, with prices going vertical as popular interest swells. The trend has been lifted by simmering geopolitical tensions, with a North Korean ballistic missile launch Monday night helping push bitcoin to a new record above $4,600. Nothing like digital currency to quell fears of a nuclear exchange.

Helping bitcoin’s surge has been weakness in the US dollar, as Pyongyang’s launch, the first to cross over Japan since 2009, calls into question the efficacy of American foreign policy prowess. The greenback hit a low not seen since January 2015, driving investors into alternatives like bitcoin and gold.

Ether has been on the move, as well, hitting record highs earlier this month on reports the IG Group in the United Kingdom would offer trading in the cryptocurrency, word that Ethereum’s founder was meeting with Thailand’s central bank, and anticipation that Ether’s “hard fork” will result in a surge similar to the bitcoin/bitcoin cash split.

It’s often hard to keep up. And major brokerages including Goldman Sachs are struggling to explain terms like “blockchain” and “zero-knowledge proofs” to clients increasingly interesting in playing along. Analyst Robert Boroujerdi earlier this month highlighted that with a total value of nearly $120 billion, “it’s getting harder for institutional investors to ignore cryptocurrencies.”

It’s an impressive rise from bitcoin’s humble start in 2010, when a Bitcoin Forum member spent 10,000 coins for two pizzas—bitcoins that are now worth $43 million. The rise has been closely linked with private markets via the advent of “initial coin offerings”—a kind of capital markets chimera mixing features of bitcoin, crowdfunding, and seed-stage fundraising into an unholy beast that entrepreneurs, regulators and investors are all struggling to understand.

PitchBook analyst Evan Morris finds that ICO fundraising has passed $1 billion so far in 2017 and digs into the history and mechanics at work, including how they developed from peer-to-peer network protocols.

Venture capital firms have been struggling to keep up with the rise of ICOs, since they threaten to democratize and crowdsource seed-stage funding. Akin to eating their own dog food, blockchain-related projects are increasingly being funded by ICOs by nearly a three-to-one ratio in capital raised. Established VC players like Andreessen Horowitz are aggressively active in the blockchain space.

VC investment in blockchain-related companies

Bitcoin

Risks remain high

Context is important: Aggregate cryptocurrency market capitalization stands at less than 2% of the value of all mined gold in the world, according to Goldman.

And regulatory uncertainty is extremely high: Last month, the US Securities and Exchange Commission ruled that many ICOs are in fact securities issues and thus subject to federal securities law.

As noted recently by Morgan Stanley analyst James Faucette, “bitcoin acceptance [in retail] is virtually zero and shrinking,” with just three online merchants out of the top 500 tracked by Internet Retailer accepting the best-known crypto as tender, down from five last year.

Yet despite the headwinds, and the inevitable profit-taking pullbacks to come, the rise of cryptocurrency appears inexorable. Why? Because according to Societe Generale’s chief global currency strategist Kit Juckes, it’s being driven by the fact that in this low-inflation era “very few governments or central bankers want a strong currency.”

As they actively dilute their money stock, under the guise of monetary policy stimulus, fiat skeptics are searching for alternatives. And these days, the normal alternative of precious metals seems so old hat. Cryptos have an element of “new tech” disruption to their anti-establishment rebelliousness. And compared to a yellow shiny rock, that’s pretty attractive right now—both as an asset class and as a basis for seed-stage fund raising.

Get free access to our latest analyst note on bitcoin/blockchain here.

Article by Anthony Mirhaydari, PitchBook

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