ABN AMRO MeesPierson: 'Cryptocurrencies are a highly volatile and high-risk investment category'

Press release -

Cryptocurrencies are a new and highly volatile, high-risk investment category just now, rather than a replacement for existing currencies, ABN AMRO MeesPierson has announced in a special report in the new edition of Beleggingsvisie. The new 'investment category' can be used to add diversity to investment portfolios. Given the highly volatile prices, the private bank believes that cryptocurrencies are unlikely to replace existing currencies anytime soon.

At present, the bank does not issue recommendations for cryptocurrencies, nor does the bank handle investments in them. However, ABN AMRO MeesPierson finds that clients regularly have questions about cryptocurrencies such as bitcoin and ether. One frequent question is whether they should be seen as money or as investments. Investment strategist Ralph Wessels from ABN AMRO MeesPierson explains, 'We're aware that cryptocurrencies are drawing much interest around the world, and that some parties see cryptocurrencies as an interesting investment. This "new" investment category represents a small part of the investor's portfolio, and serves chiefly as a means of diversification. One common feature of new investment categories, whose true value still has to be established, is that they're highly volatile and high-risk.'

No replacement for currencies at present

The private bank does not believe that cryptocurrencies offer a suitable replacement for existing currencies at present, given the highly volatile prices. Central banks want prices to be stable, and fluctuations of 10 percent or more per day are not uncommon for cryptocurrencies. Salaries and debts denominated in bitcoins, for example, could be hit hard by sudden shifts in value. Major price fluctuations also cause financial uncertainty, which diminishes consumer and manufacturing confidence, which in turn is bad for the economy.

High returns on cryptocurrencies

'Cryptocurrency' is a word that has been added to the English language to denote digital money that utilises blockchain technology. Recent weeks have seen cryptocurrencies reach record values: midway through August, for example, bitcoin passed the landmark of 4,000 dollars. Returns are already at 300 percent this year. On 19 August the digital currency had a market capitalisation of 67 billion dollars. Ether is also experiencing a climb in 2017, surging from 8.05 dollars to 292 dollars (on 19 August): a return of more than 3,500 percent. However, ether also fell from 320 dollars to 0.10 dollar in a single day last June, as a flash crash wiped out almost its entire value. 

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