Cryptocurrencies Take Off

Cryptocurrencies (e.g., Bitcoin, Bitcoin Cash, Ethereum, and Litecoin) have taken off this year, dominating headlines in the fourth quarter amid spiking prices and unprecedented volatility. Cryptocurrencies are generally open to both individuals and institutions and are widely unregulated, extremely volatile and not backed by any government or physical asset. Bitcoin, specifically, gained substantial credibility at the end of the year when Bitcoin futures began trading on the CBOE after being approved by the CFTC. Many experts note, however, that cryptocurrencies lack certain characteristics that tend to define currencies. Specifically, their value is unstable, transaction processing can be slow and security is questionable. Additionally, cryptocurrencies lack certain exchange and contract infrastructure that protects all parties in a currency transaction.

While the consensus among economists recently surveyed by the Wall Street Journal has called Bitcoin a speculative bubble, Delegate does not take a view on cryptocurrencies because they are virtually impossible to underwrite. Furthermore, even if effecting transactions by cryptocurrencies becomes more legitimate and mainstream, they remain currencies (i.e., non-earning stores of value) and thus should not be considered investment assets.