The cryptocurrency space could branch out into three different markets – and people could even stop talking about crypto as a unit a year later, predicted Paul Brody, global blockchain leader at EY.
According to Coinmarketcap.com, Bitcoin and Ether have had a wild ride in the past few weeks, with billions of dollars losing their market value.
Bitcoin, the largest digital currency by market cap, fell 30% at one point, hovering near the $ 30,000 level. It has since come back in part to its current level of around $ 38,090, according to Coin Metrics.
There are currently three “very different” stories going on in the cryptocurrency space, Brody told CNBC’s Street Signs Asia on Tuesday.
This segment of cryptocurrencies “could be classified as investment rather than entertainment,” Brody said.
“It’s hard for me to predict where they’re going, but I don’t see them as a very big future in the ecosystem,” he added.
The next part of the ecosystem revolves around Bitcoin, Brody said. The digital token has often been cited as a potential competitor to gold as a hedge against inflation and safe-haven assets. Still, Bitcoin’s price volatility tends to be much higher compared to gold.
However, according to Brody, Bitcoin is “better than gold” in some ways.
“When the price of gold goes up, people mine more, but you can’t really do that with Bitcoin,” he said.
The crypto currency is limited and a maximum of 21 million Bitcoins can be “mined” – that is currently available more than 18 million are already in circulation. New bitcoin is created by computer users who solve complicated math puzzles and consume a lot of energy.
“Bitcoin will go up if everyone agrees with this idea that you should have a certain percentage of your … portfolio in Bitcoin – that will drive a lot of participation,” Brody said.
Questions remain about the exact place of Bitcoin in an investment portfolio. Societe Generale analysts say it is still “highly competitive”.
3. The Ethereum ecosystem
“The third ecosystem that could potentially diverge here is the Ethereum ecosystem,” Brody said, adding that it is building an “entire business ecosystem” around sectors like decentralized financial services and storage.
It is “driven by the demand for these services and the growth of this ecosystem,” he added.
Meanwhile, New York University’s Aswath Damodaran told CNBC last week that he sees ether – the cryptocurrency that runs on the Ethereum blockchain – as a “better chance” of becoming a commodity than Bitcoin.
For his part, Brody predicted that “in a year we’ll stop talking about crypto as a whole – and talk about the Ethereum ecosystem or the Bitcoin value proposition.”
– MacKenzie Sigalos from CNBC contributed to this report.