DIGITAL ASSETS 2020
WHY THE NEW DECADE WILL SEE
DIGITAL ASSETS TAKE CENTRE STAGE
Did you know the overall value of the digital assets
market gained over 120% in 2019? If you didn’t you
are far from alone. Unlike the cryptocurrency mania
of 2017, that saw Bitcoin and the wider digital assets
market surge by over 4000% before the bubble
popped as the year drew to a close, last year’s gains
attracted little media attention. Facebook’s ill-
conceived Libra cryptocurrency project was the only
digital assets story to picked up by the mainstream
media in 2019.
But Bitcoin quietly rising in value from around $3455
by the end of January 2019 to $9359 at the end of
January 2020, a rate of growth also reflected in the
wider digital assets market that gained 130% over the
same period, was significant. Over 100% growth over a
calendar year would be huge for any traditional asset
class. But in the context of the wild volatility of digital
asset and cryptocurrency markets a 120%-130% gain
counts as ‘steady’.
Many crypto and financial markets analysts and
experts are convinced the slow (in context), steady
gains of digital assets over 2019 demonstrated a
new maturity in a market preparing itself to move
into the mainstream. Things are happening in the
background. Infrastructure on the same level as that
which supports the trade of traditional securities and
commodities has been built up. And mainstream
financial institutions have been preparing themselves
for a move into digital assets trading. Some have
been setting up their own specialist units and/or
readying infrastructure that is integrated with the
broader financial markets. JPMorgan Chase has even
developed its own digital coin – JPM Coin.
How will digital assets develop in 2021 and the
2020s? Lacking a crystal ball, we have no certainty.
But the stars do seem to be moving into alignment
for digital assets to move into mainstream finance
over the coming decade. Let’s take a look at some of
the most likely scenarios that could unfold and the
opportunities and threats facing the digital assets
economy over the next decade.
THE 2010s SAW A HUGE
TECHNOLOGICAL LEAP FORWARD
THE 2020s PROMISE THE SAME x10
WITH THE MAINSTREAMING OF DIGITAL
ASSETS A KEY DEVELOPMENT FOR
THE GLOBAL ECONOMY
As we move into a new decade and leave the 2010s
behind us, it’s a chance to reflect on the enormous
changes in technology that have shaped not only
the economy but our way of life. Back in early 2010,
nobody even knew what a tablet was, with the first
iPad not to be released until April of that year. The
‘cloud’ barely existed, people stayed in hotels, rather
than ‘Airbnbs’, if we wanted a cab we’d call a cab
company and nobody spoke to their tech. Or at least
not expecting an answer!
But despite the fast pace of technological change
over the last decade, scientists are convinced it is
absolutely nothing compared to the tech tsunami that
will be unleashed over the next ten years. The pace of
technological advancement is accelerating, fueled by
the rapid strides forward being made in AI.
The first drugs entirely designed by AI are now in
clinical trials and promise to revolutionise medicine.
Driverless cars are poised to hit the roads over the
next ten years, ushering in one of the biggest changes
to our way of life in modern history. And Siri, Alexa and
Google Assistant will be able to differentiate between
members of the family, tone of voice and even detect
sarcasm and respond in the same spirit.
There will be much more that will mean that from the
vantage point of 2030 we will likely look back on 2020
as a vastly more primitive time. The difference will
almost certainly be many multiples of the changes that
have taken place over the decade behind us now, as
significant as those have been. And there is a growing
belief, verging on certainty in some quarters, that the
digitalisation of the global economy that is already
well and truly underway will extend to assets and
currencies over the coming years.
Why? How might that unfold? And how could you
position yourself to take financial advantage of that
transition?
 Is it another false dawn or is the digital assets market
back for good this time and ready to force its way into
mainstream finance? Many analysts and observers
believe so. Proponents of digital assets assert that
the reality is fiat currencies have no more ‘intrinsic’
value than digital currencies and assets. The fiat
monetary system is also mainly lines of code in the
modern world, with cash nothing more than a physical
representation of collectively agreed upon ‘value’.
Cryptocurrencies and assets are no different except
for the fact they are built on a superior technology
that makes transactions cheaper, faster and more
secure. And they are independent from manipulation
by governments, financial institutions and geo-political
interests.

STATE OFIn this report we’ll look at the prospects for the
digital assets market as well as the challenges that

THE MARKET:
mainstream adoption still faces, covering:

An overview of the digital asset market and the

❚ 

DIGITAL ASSETS
technology behind it’s fast growth.

Analysis of the different types of assets available

❚ 
and how you can invest and trade them.

IN 2020 The 5 key factors that are affecting market prices in

❚ 
2020 and beyond.

❚ Market forecasts and why 2020 may provide the last

chance to buy digital assets so cheap.

The digital assets best positioned for growth in 2020

❚ 
and beyond.
Digital assets, cryptocurrencies, Bitcoin, Bitcoin Cash,
Ethereum, Ripple, LiteCoin and now Facebook’s
Libra: all terms that have been swirling around in the
media over the past few years. 2017 saw coverage of
the cryptocurrency phenomena reach new heights
on the back of the combined value of the market
capitalisation of digital assets recording 1600% growth.
As of early January 2018, the market capitalisation
of cryptocurrencies market sat at comfortably above
US$300 billion.
How things changed over the course of 2018 and into
2019. In 2018, the cryptocurrency market dropped
back to levels last seen in the summer of 2017, before
the cryptocurrency ‘bubble’ started moving into
overdrive. Bitcoin started 2017 at $1000 and finished
it at $20,000. Almost a year later and the ‘original’
cryptocurrency had dropped back to under $3500.
Source: coinmarketcap.com
Crypto-skeptics enthusiastically called the end of the
collective illusion that lines of code could represent
value in the same way as fiat currencies and physical
commodities such as gold. The digital assets fad was
over.
Except it wasn’t. For the first few months of 2019,
Bitcoin’s value held close to the lows of the end of
2018. That was a reflection of the wider digital assets
market, for which Bitcoin is a bellwether. Volatility was
at the modest levels last seen almost 2 years earlier
and it looked like the only thing preventing the final
race to the bottom for digital assets was individuals
stubbornly sitting on their holdings and refusing to
give up hope.
But in the background things were happening.
Professional, institution level trading and clearing
infrastructure was being put in place for digital assets.
Back in August 2018, Intercontinental Exchange (ICE),
the owner of the NYSE and several of the largest
commodities and futures exchanges in the USA and
globally, a serious player in mainstream, regulated
financial markets announced Bakkt.
Together with a group of well-known ‘marquee’
partners including Microsoft, Starbucks and the
Boston Consulting Group, ICE said it planned to launch
an “open and regulated, global ecosystem for digital
assets” – the Bakkt exchange. Supporting Bitcoin
futures trading was to be its first step towards that
goal. Why would these companies put their money,
efforts and reputation on the line in the shape of Bakkt
if the digital assets market was all but dead?
Source: coinmarketcap.com
Delays meant news on Bakkt went quiet for several
months and doubts again surfaced. Had ICE and
co., reconsidered and pulled the plug on Bakkt? The
answer was no. Bakkt finally launched in December
2019. Initial trading volumes have been low but it’s
early days for the exchange and hopes are high.
Facebook also announced its own plans for a digital
currency – Libra. The social media giant claims its early
goal for Libra is for it to offer basic financial services
to the ‘unbanked’ in developing economies. But
ultimately, its ambition for Libra is for it to introduce
a mainstream digital currency with high levels of
adoption across the globe.
It faces opposition from regulators and government,
including U.S. authorities and looks to be in trouble
with partners either pulling out entirely or distancing
themselves from the project. It now looks as though
Facebook misjudged public opinion on the social
media company’s trustworthiness as custodian
of a global digital currency, despite the fact Libra
is technically its own entity and controlled by the
independent Libra Foundation.
It’s no longer clear how and when Libra will
actually launch but there has been no official
announcement that the first few months of 2020
have been abandoned as a target. But Facebook is
simultaneously working on its own internal app-based
payments systems, Facebook Pay and WhatsApp pay.
Whatever finally turns out to be the case of the Libra
initiative, the very fact a company like Facebook threw
its hat enthusiastically into the digital currency ring
is a sign a mainstream context for digital currencies
probably isn’t far off.
The digital asset market has taken the developments
such as Bakkt, JPM Coin and Libra as a signal that
crypto assets are set to make a comeback – this time
from a more solid base and in a more mainstream
context. Bitcoin’s price briefly moved back above
$13,000 dollars in July 2019 and the rest of the market
followed. It has dropped back from those levels but
the fact it has held at around $10,000 into 2020 looks
like it means something. Investors have enough
confidence to hold onto their digital assets rather than
cut their losses or take a profit now.
Is it another false dawn or is the digital assets market
back for good this time and ready to force its way into
mainstream finance? Many analysts and observers
believe so. Proponents of digital assets assert that
the reality is fiat currencies have no more ‘intrinsic’
value than digital currencies and assets. The fiat
monetary system is also mainly lines of code in the
modern world, with cash nothing more than a physical
representation of collectively agreed upon ‘value’.
Cryptocurrencies and assets are no different except
for the fact they are built on a superior technology
that makes transactions cheaper, faster and more
secure. And they are independent from manipulation
by governments, financial institutions and geo-political
interests.
In the rest of this report we’ll look at the prospects for
the digital assets market as well as the challenges that
mainstream adoption still faces, covering:
❚ An overview of the digital asset market and the
technology behind it’s fast growth.
❚ Analysis of the different types of assets available
and how you can invest and trade them.
❚ The 5 key factors that are affecting market prices in
2020 and beyond.
❚ Market forecasts and why 2020 may provide the last
chance to buy digital assets so cheap.
❚ The digital assets best positioned for growth in 2020
and beyond.
2021: THE TIPPING POINT YEAR
FOR DIGITAL ASSETS?
Two and a half years ago the butcher, the baker and
the candlestick maker were excitedly pronouncing
the dawn of a new cryptocurrency era to replace, or
at least offer a viable alternative to, the fiat monetary
system. And many hoped to realise their fortune in the
meanwhile as their 1.25 Bitcoin, 2 Ether and 20 XRP
(Ripple) rocketed in value.
By the end of 2018 the same protagonists had largely
given up hope and many had cut their losses by
selling off at some point over the year’s consistent
bear market. Others were still sitting on their crypto
holdings, or part of them, ‘just in case’. But few
remained the enthusiastic and certain advocates of
just several months earlier.
Among the public and media there has relative quiet,
with cryptocurrencies having faded out of the public
consciousness over the course of the last couple of
years. There was the occasional smug ‘told you so!’ and
general feeling that cryptocurrencies had always been
a classic bubble - the perceptive greedy preying upon
the greed of the rest to make a fast and significant
buck. At best, cryptocurrencies and digital assets had
been an idea with some merit but that failed to seize
the moment and whose window of opportunity has
passed.
That might be the case. Perhaps it is fanciful that
the establishment of central banks and big finance
will allow cryptocurrency interlopers in. But there
is another scenario. That 2018’s bear market for
cryptocurrencies was nothing more than a lull and one
that was necessary to deflate the digital assets bubble
that had undeniably formed. And for the infrastructure
and improvements to digital asset technology
necessary for them to be part of mainstream finance
to be put in place.
While the exchange value of cryptos was sliding,
trading infrastructure was being developed behind the
scenes. Current prices also represent a much more
attractive risk to reward ratio for big investors than
was the case two and a half years ago.
There are whisperings that the big boys are about to
move in, some already have taken tentative steps,
and a new, more regulated, more liquid and generally
more mature cryptocurrency market began to rise
from the ashes in 2019. Will it bridge the gap into
mainstream finance this time around?
If digital assets do succeed in becoming part of the
wider financial markets ecosystem, that would mean
now is the time to invest in cryptocurrencies and also
blockchain, their underlying technology.
Another major catalyst that could be a major boost
for Bitcoin’s price trajectory in 2020 is its ‘halving’ or
‘halvening’. In less than six months’ time, Bitcoin will
see this important event, which will mean the number
of coins issued per block to miners gets cut in half
from 12.5 to 6.25. In layman’s terms, that effectively
means that BTC’s inflation rate will be cut in half and, if
it stays in Bitcoin’s code, will ensure there can never be
more than 21 million in existence.
Some respected analysts have backed the seemingly
outlandish Tim Draper claim that could see Bitcoin’s
price rise to $250,000 by 2023. However, there are
also plenty of analysts and market observers who
dispute the event will have any significant impact on
the leading cryptocurrency’s price. We’ll have to wait
and see and the truth may well fall somewhere in
the middle but keep a close eye on Bitcoin after the
‘halving’ occurs!

Blockchain’s star has also waned due to a lack of major

blockchain-based applications gaining traction. That
has raised questions over how much of the euphoria
around the distributed ledger technology was also
more hype than reality. But there are signs blockchain
may also be on the verge of spluttering back to life as
major projects move into deployment.

Over the rest of this report we’ll refresh the evergreen

background information on what cryptocurrencies
are and what’s important to understand about their
development over the past several years.
And, crucially, we’ll examine the arguments around
why rather than game over for a fad, 2020 could be
a bigger, brighter and more sustainable new
beginning for a more mature cryptocurrencies and
blockchain ecosystem.
ARE THE GENERAL PUBLIC READY
FOR CRYPTOCURRENCIES?
A growing number of consumers are now comfortable with the concept of making payments using
cryptocurrencies. Recent research conducted by payments solutions company Transaction Network Services
shows almost 50% of the populations of the UK, USA and Australia would be ‘strongly willing’ to use
electronic currencies.

Source: Transaction Network Services

The same survey showed 54% of respondents (50% in the UK) believed electronic currencies will be the main
way we make online payments within the next 5-10 years.

However, the majority of people still don’t really know a great deal about cryptocurrencies beyond that they are
gaining in popularity, there is a lot of investment in the industry and noise around it and their values are prone
to erratic swings.
While only a fool would make any definitive statements on whether the current major cryptocurrencies will
still dominate a year, 3 years or a decade from now, it also seems highly unlikely now that they will simply fade
away. The question now becomes, which, if any, of the current crop of cryptocurrencies are here to stay, what
exactly their role will be in future financial systems and how governments and regulators will deal with them –
adapt and integrate or attempt to quash. And new players will undoubtedly make their move. Facebook already
has with its Libra project and is unlikely to be the only global tech giant to enter the arena.
WILL CRYPTOCURRENCIES MAKE
A FULL RETURN IN 2021?
There are a handful of key factors that most market
observers believe will have to fall into place if
cryptocurrencies are to make a serious comeback
beyond the gains of 2019. It is unrealistic that all
of these will suddenly become a reality over the
remaining months of the year but things moving in
the right direction will give cryptocurrency investors
reason for optimism
They are:
Some form of regulation/holder recourse in the
❚ 
case of theft of loss
More institutional investor involvement
❚ 
Lower Volatility
❚ 
Greater integration with traditional asset classes
❚ 
At the Bloomberg Crypto Summit in London, held in
early December 2018, James Bevan, chief investment
officer at CCLA Investment Management, delivered the
appraisal that he expects cryptos to bounce back:
“I DON’T REGARD THIS AS AN
EXISTENTIAL CRISIS, I JUST REGARD
IT AS A BUMP IN THE ROAD AND
INSTITUTIONAL INVESTORS HAVE HAD
PLENTY OF BUMPS IN THE ROAD IN
CONVENTIONAL CURRENCIES AND
TRANSACTION SYSTEMS.”
There is evidence to suggest that prediction may prove
accurate with institutional investors gearing up for
a genuine move into cryptocurrencies, the shoots of
which many expect to appear in coming months.
In Europe, Blocktrade.com, launched in beta in
autumn of 2018 and will adhere to Europe’s recently
implemented MiFID II framework. The exchange’s
ambition is to facilitate a European regulatory
framework for cryptocurrencies. In October 2019,
Blocktrade was acquired by Cryptix, a Swiss-based full-
service provider that focuses on disrupting the finance
industry with a long-term focus on combining both
worlds: regulated and decentralized finance.
And, as already mentioned, Bakkt launched in New
York in late 2019. The significance of Bakkt is that its
stated aim is to provide a federally regulated market
for Bitcoin and other digital assets. Of even more
significance is that it is Intercontinental Exchange (ICE)
that is behind Bakkt.
ICE owns the NYSE exchange, the largest stock
exchange in the world, many of continental Europe’s
major exchanges and several of the world’s biggest
futures and options exchanges. ICE is the world’s
biggest financial exchanges operator and a true
heavyweight of the financial establishment.
And ICE isn’t going it alone. They’ve partnered with
titans of technology, consulting, and retail: Microsoft,
Boston Consulting Group, and Starbucks. Investment
partners include some of the best known VC groups in
the world like Fortress Investment Group, Eagle Seven,
and Susquehanna International Group.

If cryptocurrencies were as dead as was often

announced over the course of 2018, would Bakkt be
happening and being driven by the world’s biggest
financial exchange operator and backed by obviously
targeted strategic partners across tech and retail? We’ll
leave you to answer that one for yourself.
Other expected cryptocurrency developments
expected over the next year or two include a growing
presence of ‘stable coins’ - cryptocurrencies pegged
to real world assets such as fiat currencies or
commodities. JP Morgan’s JPM Coin is one example of
a stable coin, with the digital currency pegged to the
dollar.

Stable coins offer the technological strengths of

cryptos and other digital currencies, without the
volatility. Facebook’s Libra, if it does finally launch,
has been designed as an ‘asset backed’ stable
coin. ‘Security tokens’ are also expected to grow in
prominence. These are digital contracts that represent
ownership of assets such as real estate or stocks.
Several major stock exchange operators are known
to be working on new blockchain-based clearing
systems with beta testing due to start soon or already
underway behind closed doors.

But let’s take a step back at this point. Understanding

how the future of digital assets might play out over
the next few years can be better informed with an
understanding of the asset class’s history so far.
ORIGINS OF
CRYPTOCURRENCIES
AND OTHER
DIGITAL ASSETS
While the presence of cryptocurrencies in mainstream
public consciousness can probably be dated back to
just 3 or 4 years, Bitcoin, the original cryptocurrency,
was first launched as far back as January 2009. That
launch was preceded by the release of a white paper
under the authorship of ‘Satoshi Nakamoto’,outlining
the concept of peer-to-peer electronic cash. Satoshi
Nakamoto was either the pseudonym for a single
or group of individuals behind Bitcoin, with the
truth behind who the mysterious founder really was
unsolved to this day.
A couple of months before the release of Nakamoto’s
white paper, three individuals, Neal Kin, Vladimir
Oksman, and Charles Bry, filed an application for
an encryption patent application and registered
the website domain Bitcoin.org. All three deny
any connection to Satoshi Nakamoto and claim to
have merely been acting on behalf of a group of
programmers working with him. This is generally
accepted as true and while there have been numerous
theories and claims, the identity of Bitcoin’s founder(s)
remains a mystery (though the National Security
Agency is thought to have uncovered the secret).
In 2011 Nakamoto announced, digitally, that he
was stepping back from Bitcoin to move on to ‘new
projects’.
However, while interesting, the Batman-esque secret
identity of the founding father of cryptocurrencies is
a side point. What is more important is to understand
the motivation of Nakamoto and the others behind the
rise of Bitcoin as an alternative to the established fiat
money system.
Cryptocurrency advocates believe that the fiat money
system the world economy has been based on since
the end of the gold standard has two major flaws, both
resolved by cryptocurrencies.
1: Government-controlled central banks can print
money at will.
2: Third-party authorities are necessary to validate
electronic money transfers.
These two flaws, it is argued, maintain and facilitate
global economic inequality and corruption as well
as inefficiencies. Governments being able to print
money means that economically powerful nations can
maintain the status quo by manipulating the value
of several dominant fiat currencies to preserve their
dominant role in the cash flow of the international
economy. This in turn means the most powerful
economies can borrow huge sums of money and
can simply print more to service debts. The game
is essentially rigged in their favour and maintains
their wealth in comparison to countries with weaker
currencies and, further down the chain, companies
and individuals.
Fiat currency critics maintain that every currency unit
a central bank creates benefits the early recipients of
the money—the government and the banking sector
— at the expense of the late recipients of the money -
the wage earners.
This brings us neatly onto the second perceived flaw
of fiat money – the necessary role of the banking and
financial services sector. The rise of electronic money
transfers has increased this role. When currency units
exist as no more than numbers on a computer screen,
what is to prevent currency units from simply being
copied? Who says which digital numbers on a screen
are really money and which are just digital numbers?
 HOW DO
CRYPTOCURRENCIES
WORK?
The next obvious question is how do cryptocurrencies
Banks and auxiliary financial service providers such
solve the perceived flaws inherent in fiat money?
as payment processing companies, given authority
by government-controlled financial regulators, are
Bitcoin’s blockchain technology removes the need
❚ 
required to keep track of the flow of these digital
for the involvement of centralised intermediaries to
numbers. Every financial transaction results in a
facilitate money transfers and prevent ‘copying’ of
subtraction from the digital numbers that comprise
currency units.
one balance and their addition to another.
The total number of cryptocurrency units are
❚ 
A relatively small number of authorised third-parties
capped from the outset, preventing ‘money
track and verify these digital money transactions.
printing’.
This, the cryptocurrencies camp also argue, is both
inefficient (it makes money transfers expensive and
Nakamoto’s Bitcoin was built on blockchain - a peer-
time consuming) and vulnerable to corruption
to-peer data storage and transfer software. But how
through the placement of financial power into the
does blockchain’s peer-to-peer system prevent the
hands of the few.
duplication of cryptocurrency units and remove the
need for any centralised regulation?
Satoshi Nakamoto, and those who followed, saw
cryptocurrencies as the answer to these inherent
Blockchain technology is the real genius of
flaws in the fiat money system. This, they believe,
cryptocurrencies and other digital assets and, while
will provide the foundation for a new era of reduced
it was initially developed as the backbone of Bitcoin,
individual and geo-political inequality, freeing the
it has huge potential to be employed for many other
world’s economy to enter a new phase of wealth
uses. Blockchain is currently being used to developing
creation unshackled from the personal interests of
more efficient solutions for applications from medical
the rich.
records, supply chain management, tourism, stock
marketsand other derivatives exchanges to name only
a few.
So, how does blockchain work? Essentially, it is a digital
ledger system. A ledger is a record of transactions,
usually financial but not necessarily. In it are recorded
every transaction of something in or out. A company
ledger would be a record of every financial income and
payment over the history of the company, maintained
by the accountancy department.
But a blockchain ledger neither requires auditing by a
centralised authority (ie. the accountancy department)
nor is vulnerable to being destroyed or tampered
with. These qualities come from blockchain’s peer-
to-peer character. In order for any entity (individual,
company, institution etc.) to be able to make or receive
a transaction of whatever the blockchain’s ledger is
tracking, they must use a device that holds a copy of
the ledger database, either in part or its entirety.
Each device with a database copy is one of the
blockchain’s ‘nodes’. For a transaction to be verified:
The transactions are further confirmed by ‘miner’
nodes, each of which store a copy of the entire
blockchain and whose role will be more fully explained
shortly. Nodes constantly communicate with each
other over the internet and update each other’s ledger
record. This means if the database on one node is
tampered with, the network will detect the alterations
and cut the node off. The most commonly consistent
ledger database is accepted as the truth. This is a
remarkably efficient security system and essentially
makes the blockchain incorruptible and fraud and
theft impossible without the need of any centralised
authority.

Node A formsan input script for the new data

❚ 
transaction. It will reference the output script of the
previous data transaction A received (in the past).
This proves the ownership of the data by Node A
using its Public Key and verifying the Signature.

The output script for the new transaction will be

❚ 
formed by Node B, the recipient of the data being
transferred by Node A. Node A will store the hash
(a complex code) of the data Address of B and Source: total solutions

enable B to transfer this data in future by verifying

the veracity of Node B’s ownership.
The ‘money printing’ practice of central banks The ‘miner’ node that solved the puzzle is then
that issue fiat currencies also doesn’t exist for rewarded with a block of new cryptocurrency units,
cryptocurrencies, which have their total number of the incentive for its participation in the blockchain
units capped from the outset. In the case of Bitcoin, system. Miners also receive ‘transaction fees’ from
there will only ever be 21 million Bitcoin units once the sender and/or recipient for their role in verifying
the total number has been ‘mined’ and in circulation. the transaction. Once all the finite number of units of
This means that supply is removed from the equation a cryptocurrency have been ‘mined’, the incentive for
and value is a product of demand only. If demand miners to verify transactions by creating blocks will be
increases, the value of a cryptocurrency unit will based solely on these transaction fees.
keep rising and simply be divided into ever-smaller
denominations. The kind of devaluation (inflation) It is theoretically possible for a cryptocurrency to
that results from a central authority (central bank) use a technology or system other than blockchain to
increasing the supply of a fiat currency is not a factor. verify transactions. However, Bitcoin and the other
cryptocurrencies that have gained significant traction
Cryptocurrency units are gradually drip-fed into to date are all blockchain based.
circulation by ‘miner’ computer nodes as demand
increases, measured by the volume of transactions
happening. Roughly every ten minutes ‘miner’ nodes,
which are powerful computers, usually harnessing a
network of computers to combine their processing
power, collect a few hundred pending cryptocurrency
transactions. This group of transactions is a ‘block’ in
the blockchain. These, we won’t go into the technical
details which at this point are complex, are turned
into a mathematical puzzle (they are cryptographed
– the ‘crypto’ of cryptocurrencies). Mining nodes then
compete to solve this puzzle or code and the first to
do so communicates the answer to the network. If the
network confirms the sender of the cryptocurrency
unit has the right to spend it and the puzzle’s solution
is correct, the block cryptographically sealed and
added to the ledger.
THE MOST POPULAR
DIGITAL ASSETS
Bitcoin, the original cryptocurrency, is still by far the most well-known and dominant digital asset. But there
are many others now in circulation. Some, like the ‘utility coins’ Ethereum and Ripple are also well established.
And Bitcoin has competitors such as LiteCoin, which claim to be built on superior blockchain technology and
are more scalable – a practical necessity to mainstreaming. And there are hundreds more, most of which have
gained relatively insignificant traction in levels of adoption and supporting infrastructure (exchanges, wallets
and goods and services sellers willing and able to accept them).

But no one really knows how the market will mature. Eventually there could be one clearly dominant
cryptocurrency, like Facebook’s Libra, there could be several, or there could be many.

Which are the cryptocurrencies that currently have a notable level of traction and what distinguishes them
from each other?
DIGITAL ASSETS BY % OF TOTAL MARKET
CAPITALISATION (DOMINANCE)

Source: CoinMarketCap.com

Bitcoin: the original cryptocurrency, Bitcoin now has a 10-year+ history and an internationally recognised ‘brand
name’. The ‘double spending’ problem is solved by the blockchain peer-to-peer network and initial security
issues appear to have been largely overcome. Bitcoin has the highest liquidity and supporting infrastructure of
any cryptocurrency. Bitcoin’s biggest drawbacks are the time it takes for transactions to be verified, the relatively
low number that can be processed per second and the energy consumption involved in the ‘mining’ process that
secures transactions and ownership. There is a growing school of thought that these limitations mean that in its
current form Bitcoin is more suited to a future as a store of value, or commodity, than as a currency. A kind of
digital gold.

Bitcoin Cash: a split-off from Bitcoin, Bitcoin Cash has existed since the beginning of September 2017. It is the
result in a ‘hard fork’ of the Bitcoin blockchain following a change to the protocol intended to solve a scalability
issue that caused a schism between ‘miners’. With smaller ‘blocks’ than the original Bitcoin (they share the
same blockchain up until the fork), it is easier to mine make transaction verification faster. It is the second most
valuable major cryptocurrency but at this point its future is uncertain. It could potentially replace original Bitcoin
as the dominant blockchain fork, it could fizzle out as a cryptocurrency or could find a middle ground.
Bitcoin SV: BSV is a cryptocurrency created as a result of Bitcoin Cash hard fork (actually, it was introduced
a little bit prior to the fork – in August 2018). On November 15th 2018, the blockchain officially split into
two competing coins – Bitcoin ABC (Adjustable Blocksize Cap) and Bitcoin SV (Satoshi Vision). The latter
cryptocurrency aims to bring back the values and technology of the original Bitcoin – decentralisation, using
crypto solemnly as a payment and trade method and elevating the capacity of the network.
Bitcoin SV ‘chain leader’ Craig Wright claims to be Satoshi Nakamoto but it seems more likely that is a claim
motivated by the desire to claim authority and trust. Bitcoin SV’s early life isn’t, however, playing its part in that
regard and its future is threatened by extreme volatility (suspected as price manipulation) and illiquidity.

Ethereum: the second most widely used cryptocurrency, Ethereum is an opensource software platform built
on blockchain technology. Ethereum miners earn ether, a crypto token, and developers can build and deploy
decentralised applications on the platform. Some experts believe the wider ecosystem Ethereum offers will lead
to it displacing Bitcoin as the dominant cryptocurrency.

Ethereum Classic: like Bitcoin and Bitcoin Cash, Ethereum and Ethereum Classic are the result in a hard fork in
the original Ethereum blockchain. In 2016, The DAO, a venture capital company built on the Ethereum platform
saw a security breach lead to the theft of $50 million worth of ether. The Ethereum community largely agreed on
a hard fork in blockchain to return the stolen ether. However, a smaller sub-section of the community felt this
violated the key principle of immutability in the blockchain and kept the original blockchain as it was.
While the new Ethereum blockchain has become the dominant fork, Ethereum Classic has survived and is
creating its own identity on the principle of ‘immutability’ in the blockchain.
Litecoin: launched in 2011, Litecoin is very similar to Bitcoin but has an algorithm designed to let individuals
with normal computers take part in mining. This was a response to increasingly specialised and expensive
hardware being required to mine Bitcoin as transaction volumes increased and blocks had to be more
quickly formed. Litecoin has recently been losing cryptocurrency market share but still has a reasonably good
infrastructure and network strength.

Dash: a response to the perceived weaknesses in Bitcoin’s transaction verification speed and provision of
anonymity, Dash employs a two-tier blockchain architecture. This consists of miners and ‘masternodes’ that
help facilitate close to real-time transactions and ‘coin-mixing’ that helps protects the identity of users. These
innovations, particularly the faster transaction times, have their value and Dash is gaining in popularity as a
result.

Ripple: slightly different in nature to the others in this list, Ripple is the banking establishment’s horse in the
cryptocurrencies race. Its main role is as a settlement network for other fiat currencies and cryptocurrencies as
well as any other standardised tradable units as commodities. Settlements are paid for in Ripple’s XRP tokens,
which are themselves traded on cryptocurrency markets. The underlying principles are very similar to Bitcoin
but its intended role is as a settlement ‘middleman’, potentially as a new global standard for all currency and
commodities transactions. Towards the end of 2018, Ripple’s XRP tokens leapfrogged Ethereum’s ether as the
second most valuable digital asset by overall market capitalisation.

The inverse didn’t last long but demonstrates the established order between digital assets is certainly not one
that can be relied on long term.

A great infographic comparing and contrasting the 6 major cryptocurrencies (minus Bitcoin Cash) has been put
together by Visual Capitalist - http://www.visualcapitalist.com/wp-content/uploads/2017/09/bitcoin-ethereum-
other-cryptocurrencies.html
BUYING AND USING
CRYPTOCURRENCIES
AND DIGITAL ASSETS
While there is a degree of variation between different
cryptocurrencies, the common steps involved
in buying, storing and then spending or selling
cryptocurrencies are roughly the same. Before
buying cryptocurrency, it is first necessary to set up
a ‘wallet’. This wallet is similar to an e-wallet from an
online payment processor such as PayPal or Skrill
and allows the holder to store, receive and transfer
cryptocurrencies. Some wallets accept only one kind
of cryptocurrency while others can be used to hold
several different cryptocurrencies, just like having
distinct GBP, EUR and USD funds in an e-wallet.
Once a wallet has been set up the main way to buy
cryptocurrency units is via an exchange. The most
well-established exchange is Coinbase though
other options are also available, including Kraken
and Bitstamp. Do some research on exchanges as
they have differences in transaction fees, variety
of cryptocurrencies, security history and customer
service reputation.
When an exchange has been decided upon an account
needs to be set up, which is simply a case of filling
out an online form and usually providing copies of
ID to prove identity. There should then be simple
instructions provided on how to send fiat currency like
GBP, USD or EUR to your exchange account, via either
bank transfer, debit or credit card or from an e-wallet
such as PayPal or Skrill. Once you have funds in an
exchange account it is simply a case of placing a ‘buy’
order for whatever cryptocurrency is wanted at the
exchange’s current conversion rate. Moments later the
cryptocurrency should be added to the account and its
value deducted from the fiat currency balance.
The cryptocurrency can then be kept in the account
on the exchange or transferred to a wallet controlled
by the owner. There is a degree of risk as wallets and
exchanges have both been hacked in the past and
cryptocurrencies stolen but the industry has been
learning from security breaches and security has
improved.
Alternatively, cryptocurrencies can be held offline in
‘hardware wallets’, or paper wallets, which are basically
a piece of paper with an address, key and QR code.
These avoid the hacking risk but then the piece of
hardware or paper must be kept safely somewhere.
An alternative to an exchange is buying cryptocurrency
from a specialist cryptocurrency ATM, more of which
are starting to pop up. Via the ATM, fiat money is
usually paid via debit/credit card, a wallet address
provided and the cryptocurrency is then sent
electronically to the wallet from the ATM.
Converting cryptocurrencies back into fiat currency is
the same as buying them but in reverse. Return the
cryptocurrency from a wallet to the exchange account,
if it has been transferred out, and place a sell order.
You’ll get back the amount of fiat currency that is the
current exchange rate for the cryptocurrency sold.
Spending cryptocurrencies is also relatively simple and
just involves provided a wallet or exchange account
address and key, like a card and PIN system. However,
almost any online or offline retailer that accepts
cryptocurrencies, unless you’re buying something
illegal which is obviously not recommended, will
accept good old-fashioned fiat currency, so what’s
the point in going to the extra trouble other than the
simple novelty?
While there is a degree of variation between different
cryptocurrencies, the common steps involved
in buying, storing and then spending or selling
cryptocurrencies are roughly the same. Before
buying cryptocurrency, it is first necessary to set up
a ‘wallet’. This wallet is similar to an e-wallet from an
online payment processor such as PayPal or Skrill
and allows the holder to store, receive and transfer
cryptocurrencies. Some wallets accept only one kind
of cryptocurrency while others can be used to hold
several different cryptocurrencies, just like having
distinct GBP, EUR and USD funds in an e-wallet.
Once a wallet has been set up the main way to buy
cryptocurrency units is via an exchange. The most
well-established exchange is Coinbase though
other options are also available, including Kraken
and Bitstamp. Do some research on exchanges as
they have differences in transaction fees, variety
of cryptocurrencies, security history and customer
service reputation.
When an exchange has been decided upon an account
needs to be set up, which is simply a case of filling
out an online form and usually providing copies of
ID to prove identity. There should then be simple
instructions provided on how to send fiat currency like
GBP, USD or EUR to your exchange account, via either
bank transfer, debit or credit card or from an e-wallet
such as PayPal or Skrill. Once you have funds in an
exchange account it is simply a case of placing a ‘buy’
order for whatever cryptocurrency is wanted at the
exchange’s current conversion rate. Moments later the
cryptocurrency should be added to the account and its
value deducted from the fiat currency balance.
The cryptocurrency can then be kept in the account
on the exchange or transferred to a wallet controlled
by the owner. There is a degree of risk as wallets and
exchanges have both been hacked in the past and
cryptocurrencies stolen but the industry has been
learning from security breaches and security has
improved.
Alternatively, cryptocurrencies can be held offline in
‘hardware wallets’, or paper wallets, which are basically
a piece of paper with an address, key and QR code.
These avoid the hacking risk but then the piece of
hardware or paper must be kept safely somewhere.
An alternative to an exchange is buying cryptocurrency
from a specialist cryptocurrency ATM, more of which
are starting to pop up. Via the ATM, fiat money is
usually paid via debit/credit card, a wallet address
provided and the cryptocurrency is then sent
electronically to the wallet from the ATM.
Converting cryptocurrencies back into fiat currency is
the same as buying them but in reverse. Return the
cryptocurrency from a wallet to the exchange account,
if it has been transferred out, and place a sell order.
You’ll get back the amount of fiat currency that is the
current exchange rate for the cryptocurrency sold.
Spending cryptocurrencies is also relatively simple and
just involves provided a wallet or exchange account
address and key, like a card and PIN system. However,
almost any online or offline retailer that accepts
cryptocurrencies, unless you’re buying something
illegal which is obviously not recommended, will
accept good old-fashioned fiat currency, so what’s
the point in going to the extra trouble other than the
simple novelty?
 CRYPTOCURRENCY
PRICE DRIVERS
The value of cryptocurrencies, like any asset class, is
driven by supply and demand. Supply, its ultimate
ceiling fixed, is easier to predict than that of fiat
currencies. The only variation comes through the
pace of mining up until the point that the pre-
ordained maximum number of cryptocurrency units
has entered circulation. And the pace of mining, as
explained above, is controlled by demand as mining
needs transactions to be able to build blocks and
receive new Bitcoin in remuneration. Therefore,

INVESTING IN
demand can be considered the real price driver for a
cryptocurrency.

CRYPTOCURRENCIES Because cryptocurrencies are such an immature asset

Which brings us on to the concept of investing class, demand is mainly driven by two things:
in cryptocurrencies. While real advocates of
cryptocurrencies do spend them in the same was as ❚ Rate of adoption
fiat currency, helping to promote their proliferation,
❚ Sentiment on future rate of adoption
others simply buy and hold as a speculative
investment. Because cryptocurrencies, even Bitcoin,
The more people acquire a cryptocurrency,
are still an immature market, their exchange
and buy, sell or pay for goods and services with
values to fiat currencies is erratic, with sometimes
that cryptocurrency, the more traction it gains.
spectacular peaks and troughs. A perfect example of
More wallets and exchanges start to accept that
that was the late 2017 bubble and subsequent bear
cryptocurrency, more vendors accept it as payment
market over 2018.
and it becomes more liquid.

However, for those who think digital assets are a

Sentiment is influenced by adoption trends and
speculative investment they are willing to take a
news around positive developments such as a major
risk on, what options are available and what are the
financial institution, some other kind of institution or
main considerations?
organisation or a public figure somehow endorsing the
cryptocurrency. Alternatively, negative news such as
technical problems with the cryptocurrency’s protocol
or security vulnerabilities or breaches have sent the
value of cryptocurrencies crashing, such as when the
Mt. Gox Bitcoin exchange was hacked, resulting in
the theft of around 800,000 bitcoins. Bitcoin’s price
also recently dropped by around 10% when a Morgan
Stanley representative labelled it a ‘fraud’.

Anyone invested in or considering investing in

cryptocurrencies should educate themselves on these
price drivers and keep abreast of them in the same
way as would be advisable with any other asset class.
CRYPTOCURRENCY
INVESTMENT
OPTIONS
For anyone who does want to invest in
cryptocurrencies, what are the options available?
Buy and hold: the simplest way to invest in
cryptocurrencies is simply to buy and hold in the
hope that it/they become established in the future.
If Bitcoin, Ethereum, Ripple or any of the others does
become truly mainstream in the future, their values
will, because of the finite number of units, almost
certainly rise to levels many multiples higher than
those of today. However, investors should be aware of
the hacking risk if cryptocurrencies are stored online
and of course the possibility that if cryptocurrencies,
or the cryptocurrency they have chosen to invest
in, doesn’t go mainstream, the chances are it will be
worthless in the future.
Trade: many CFDs and spread betting brokers
now offer tradable derivatives based on the major
cryptocurrencies. Their extreme volatility means that
their average daily price changes are several times
that of even the most volatile fiat currencies. For
high risk traders this offers an attractive opportunity,
though it obviously comes at the price of the potential
for heavy losses if finishing on the wrong side of a
cryptocurrency position.
Funds: it is also now possible for mainstream
investors to gain exposure to Bitcoin and other
cryptocurrencies without buying and holding them
personally by investing through funds. Earlier this
year, Hargreaves Lansdowne, the UK’s biggest online
investment platform, started offering its customers
access to a fund tracking the price of Bitcoin. Managed
by Swedish company XBT Provider, the fund is
structured as an ‘exchange-traded note’, which means
it is listed on the stock exchange and can be bought
and sold like company shares. It has a complex
structure that means that British investors buying
the fund in GBP are exposed to the USD and Swedish
kronar exchange rates as well as Bitcoin’s value.
Another fund announced in September this year by
a company called DLT Financial will track an index of
10 major cryptocurrencies. It is likely that over the
next year or two a raft of new cryptocurrency-tracking
funds will be launched, including ETFs.
ICOs: Initial Coin Offerings are an alternative
cryptocurrency investment. An ICO is akin to an
IPO, with a company seeking to raise capital issuing
shares. The difference is these shares are in the
form of cryptocurrency units with the particular
cryptocurrency only used to represent that particular
company. Many early-stage company investors
complain about being the victims of the same
devaluation effect as when central banks print more
fiat currency with boards often diluting the value held
by original shareholders through future share issues.
One venture capital investor quoted in a recent FT
article on the ICO phenomenon remarked “it would
be like a social network where early adopters make
much of the profit if the business takes off. I’m getting
Facebook bucks that grow with the network.”
If a company that has issued an ICO succeeds,
then its currency will be more in demand. Since
the cryptocurrencies supplies are capped from the
outset, anyone holding units would benefit from their
increasing value. Smaller early-stage investors cannot
be ridden over rough-shod by the controlling interest.
However, skeptics argue that ICOs exploit a regulatory
loophole and by selling cryptocurrency units rather
than shares the company stays outside of the scope
of securities regulators and can market the offering as
they wish.
The popularity of ICOs has, however, fallen off a cliff
edge over the past couple of years. That can be put
down to a combination of a high number of outright
scams, well-intentioned projects funded by ICOs
failing to take off and provide investors with a return
and the fact that the USA’s Securities and Exchanges
Commission (SEC) has waged a war on ICOs and all
parties involved with them.
The SEC has all but outlawed ICOs touching any part of
U.S.-owned financial infrastructure, on the argument
that they offer securities without adhering to the strict
rules around the sale of securities.
CONCLUSION
Hopefully readers of this report will now have a much better general overview of cryptocurrencies and digital
assets: their origins, the arguments supporting them, the risks involved in an asset class that is still in its infancy
and options available to those who are interested in taking on a speculative investment on their future.
What the future holds for Bitcoin, Ethereum, the other major cryptocurrencies currently in circulation and the
new arrivals such as JPM Coin, possibly still Libra, and others that will doubtless appear in future, no one really
knows.

Blockchain technology certainly has a bright future in all manner of applications and if nothing else, that will
always have been bequeathed to the world by Bitcoin and the mysterious figure of Satoshi Nakamoto and his
disciples.

Cryptocurrencies and digital assets almost certainly have a future. Whether that is as an eventual replacement
of fiat currencies, helping to create a new, better world order, or a lesser role such as in making electronic
payments more efficient, time will tell. Time will also show if any of the first cohort of cryptocurrencies will
eventually be those that become truly mainstream. We don’t know and we don’t think anyone else can really
claim to either. At this point it’s all a guess, albeit it can be an informed one.

Whatever happens, it will certainly be an interesting development and one worth keeping an eye on, either from
a general or investment perspective.