Cryptocurrency prices have enjoyed strong growth in recent months. But far from being a cause for celebration across the board, a growing number of analysts are calling out this price growth, suggesting it is part of a bubble in the cryptocurrency markets.
UBS became the latest major player to add their voice to the discussion this week, with a new research paper for investors explicitly pointing to the bubble in price speculation, a perspective that is becoming increasingly shared amongst cryptocurrency investors and financial analysts.
While few doubt the long-term value of cryptocurrencies, there are growing concerns that the current levels of activity are unsustainable. In July alone, there were 30 ICOs, or initial coin offerings, introducing 30 new tokens to the already-crowded altcoin market.
In August, there were 50 more launched, and there are few signs of the pace easing. But with each new coin that is introduced, and each new company opting for ICO over traditional ways of raising finance, there are concerns that this will ultimately prove increasingly unsustainable.
So what’s next for cryptocurrencies, given the current condition of the market? Few would now argue that cryptocurrencies are not approaching bubble territory, yet there appears no lack of appetite amongst investors looking to capitalize.
According to some analysts, the best bet lies in choosing proven cryptocurrencies. Indeed, some, including UBS in a report to investors this week, are advocating the best investment opportunities lie in investing in companies operating in the space.
According to UBS, investors should back companies who are emerging as the first in their field to implement blockchain applications, or in companies who are encouraging others to adopt the technology. This, they argue, is where the majority of investment opportunities await, irrespective of the wider market bubbling outside.
The future of the underlying technology is not in doubt, and it is now rare to hear commentary that doesn’t address the importance of the blockchain for development.
While cryptocurrencies and the growing crop of altcoins might represent a chance to generate massive returns for the shrewd and lucky, the underlying opportunities in supporting businesses that back the technology are arguably a much stronger bet for future growth.