Bitcoin investments becoming popular with mainstream investors

Bitcoin-based investments are now among the top five most-viewed items on the website of the UK’s largest broker.

Hargreaves Lansdown, which has over a million clients, says that over the last few months, customers have become much more interested in investing in the popular cryptocurrency. Of the top five most-viewed pages on its website, three relate to Bitcoin-based investments. The impact is that more traditional investments have now been falling down the popularity charts, with more and more investors looking to take a chance on an alternative asset class.

In early December Hargreaves Lansdown’s spokesman Danny Cox said: “Some of these securities have only been on our platforms since July. As the price has shot up, so has the interest of clients in the funds.”

He explained that a number of clients want to buy Bitcoin directly but that this is not possible. He said “but we tell them that the only way they can access these assets is through the platform, and that means via quoted securities such as investment trusts or exchange-traded funds.”

Although the value of Bitcoin has been erratic over the past month or so, there are enough analysts still predicting price rises in 2018 to encourage more investment from those willing to take risks.

Over the past year, Bitcoin’s value has risen by 1,600 per cent but the price has also crashed overnight at times. These crashes are likely to continue next year, according to most analysts, who explain that the cryptocurrency value is intrinsically volatile. Nick Colas of DataTrek Research told CNBC: “Bitcoin and cryptocurrency are hard to value and their economic utility relies on use cases that are not yet built. Of course the volatility we’ve seen will continue.”

However, he added that he expects a mid-point value of around US$14,000 in 2018 to be “a reasonable price point,” adding: “Bitcoin can rally to US$22,000 and still be reasonably priced, or plummet to US$6,500 and also be correctly valued. We expect to see bitcoin trade for both prices in 2018.”

For those who want to put some cash into Bitcoin in 2018, Hargreaves Lansdown’s top Bitcoin investment funds include Grayscale’s Bitcoin investment trust. This fund buys Bitcoin and then allows investors to purchase shares in the trust at a premium currently running at 23 per cent above Bitcoin’s value.

XBT tracker funds are the second most popular cryptocurrency fund offered through Hargreaves Lansdown. Investors buy shares in the funds, at a price intended to mirror the price of Bitcoin itself. However, there are concerns that hugely volatile price movements may become difficult to ‘track’ in the same way as other asset classes.

Hargreaves Lansdown analyst Laith Khalaf explained that these funds do not come without risk: “I would not underestimate the risk of owning these investments. It is worth trying to understand exactly how the tracking mechanism works and how accurately it tracks Bitcoin price movements – and how this might change if there is serious volatility, beyond the scale we have already experienced.”

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