Why this 12 months cryptocurrencies will go mainstream – and turn out to be as strong an funding as gold: When my 89-year-old father purchased in I had an epiphany, says WILL NUTTING. There’s a large alternative

One of the last things my late father did, before his death aged 89, was to invest in Bitcoin.

After years of scepticism, and not fully understanding what Bitcoin was, he grasped how important cryptocurrency is going to be.

It isn’t a flash in the pan, it’s not a financial bubble – it is now a credible alternative to gold and the stock market. My father, as he had been throughout his life, was ahead of the game.

He saw the implications faster than most people. But this is going to be the year when millions of ordinary investors catch up, when the general public stops sniggering and starts paying attention. Crypto is going mainstream.

That word, ‘cryptocurrency’, is one of the things that has held it back. For a start, Bitcoin and similar tokens are not the kind of currency you carry in your pocket as cash. You’ll probably never go to the supermarket and pay with a cryptocoin.

Crypto, in most cases, isn’t cash – it’s wealth. There’s a big difference. Think of it like this. Imagine you own a £1 million apartment, and the kitchen needs a refit. You hire a builder who charges you £10,000. You obviously don’t pay him by transferring 1 per cent of the property to him. That would be a terrible transaction – even though the value will be the same.

Investing in cryptocurrency is the equivalent of buying property, not like putting money aside to pay for expenses. Like property, it works best as a long-term commitment.

In financial jargon, it’s ‘a store of value’ in a ‘digital asset’.

That phrase ‘digital asset’ confuses a lot of people. It implies something invisible, a commodity that exists only as a stream of 1s and 0s on a computer hard drive.

Unlike gold, you can never hold a ­Bitcoin in your hands or cash it in at a High Street dealer.

For most people, gold has little practical use other than as jewellery, but everyone knows it is valuable. That’s why, at times of international tension, its value soars: the price of gold has risen from around £3,300 to more than £3,500 per ounce since the start of this year.

Cryptocurrency, of course, doesn’t have the same physical solidity. Many people are hesitant to invest in it for that reason. But think about it: we all trust digital assets, not just as ­investments in our ISAs, but for everyday banking.

Almost everyone manages their finances on phone apps and banking websites. Few of us queue up in bank branches with a cheque book or a bag of coins any more. It’s all done on a smartphone. In other words, digitally. Even cashpoints are largely redundant, even if many lament the loss.

In the same way, investors who put their money into gold don’t usually have bars and ingots around the house; they have digital records of their investments.

You might own shares in a house-building company, but that doesn’t mean there are bricks with your name on them or even a physical paper share ­certificate. It’s all digital.

The main cryptocurrencies – Bitcoin, Ethereum, Solana, Tether and XRP – are as solid as banking apps and some of them have been around as long. They are no longer the enfants terribles of the financial markets.

Horror stories used to abound: of investors who stored the password to their crypto account on a laptop or USB stick. If that device was lost or erased, they forfeited their access to their coins… for ever. But that’s no longer how it works.

In 2024, cryptocurrency went mainstream as the US securities regulator, the SEC, recognised Bitcoin as a commodity, and now regulated vehicles called exchange-traded funds (ETFs) are the most common method of accessing cryptocurrency.

It’s hacker-proof, audited, efficient – and boring. And last month England, Wales and Northern Ireland passed a law designating digital assets as personal property. Crypto has, it seems, started to grow up.

For many investors, of course, it has already offered extremely lucrative returns. Bitcoin has been the best-performing asset in the world by far in the past 15 years. Even in the past five, it has outperformed gold, despite the latter’s recent meteoric rise.

If you’d bought $100 worth of Bitcoin in 2011, when the value per coin was $1, your holding would be worth about $6,765,500 today (roughly £5 million). The overall global value of all digital assets is currently about $3.2 trillion (£2,370 billion).

Driven by Donald Trump’s support, last summner the value of one Bitcoin went as high as $120,000 – and has currently settled at just under $90,000.

But such stellar leaps are part of the image problem it needs to shed. As long as it’s seen as a Get Rich Quick scheme, the general public will stay away.

Cryptocurrencies might look like Concorde but the reality is they’re more like a budget airline: unfashionable and prone to glitches, but relentlessly practical and ruthlessly focused on getting the job done. And like budget airlines, they will come to dominate the market.

They are, in short, the future of finance, and this success will come from being unglamorous and reliable.

Just as no one needs to know how hedge funds work to save into an ISA, it isn’t necessary to understand what a ‘blockchain’ is, or a ‘non-fungible token’, before investing in digital assets.

But one aspect of this new technology is important to grasp. Many critics of crypto complain that creating it uses too much energy, because so many computers have to chug away, performing billions of calculations, in order to ‘mine’ each coin and maintain the network. Rows of warehouses, crammed with mainframes work night and day, consuming vast amounts of power to do so, all over the world. Bitcoin alone uses about as much ­electricity annually as Poland.

Instead of treating that as a disaster, we need to see it as a massive opportunity. Bitcoin is doing something that until now has been impossible – it takes energy and turns it into portable wealth.

Gold can’t do that. Gold just sits there, a lump of metal. Crypto creation can harness all the world’s excess and unwanted energy, the power that can’t be stored in batteries or consumed by the national grid.

In Texas during 2024, for example, a massive eight terawatts of energy generated by wind and solar power was wasted, because it wasn’t immediately needed. That’s enough to keep Transport for London, and all its Tube trains, running for five years.

Brazil’s wastage was even worse. Wind turbines whizz around, solar panels heat up, and a lot of that energy cannot be translated fast enough into the grid to be used. The demand isn’t there. But it could be, if we funnelled it all into crypto-creation.

Globally, tens of billions of dollars of ‘clean’ energy evaporate each year because grids cannot cope. Crypto can absorb that and turn it into something with permanent value.

Best of all, in the case of ­Bitcoin, it is truly international, controlled by no government, and devoid of politics. This is an investment that cannot be devalued by central banks. Local economies might collapse, inflation might run riot in failing countries, but cryptocurrency is elevated beyond all that.

This is the point in its evolution when I would urge small investors to consider buying in. But that doesn’t mean going all-in. It’s not about punting your house, it’s about acknowledging that a 5 per cent allocation of your portfolio offers protection against financial pitfalls such as inflation, currency devaluation and government blunders.

It’s like an insurance policy – you don’t purchase one because you’re expecting an imminent disaster, but because it would be foolish not to.

Cryptocurrency is going to change the world, just as computers began to do 40 years ago. Anyone who saw the potential in Microsoft or Apple in the 1980s, or Facebook and Google in the 2000s, was making a canny investment.

We have the opportunity to do the same now. That $3.2trillion of digital assets could easily be worth $10trillion in three to five years. That’s just the law of big numbers, and it’s a realistic prospect.

Will Nutting is the founder of Nutstuff, a twice weekly investor newsletter. Visit nutstuff.co.uk