Is Crypto Its Own Asset Class? Industry Experts Weigh In

Crypto’s role in finance is growing, but the technology is still new, and there are hurdles to clear. That was a key takeaway in a discussion between four crypto and blockchain leaders at the Global Financial Leadership Conference.

Pointing out that Apple has more cash on its balance sheet than the entire crypto industry has in market cap, BitMEX founder Arthur Hayes says crypto has not yet reached asset class status unto itself.

“Could it become a bona fide asset class in the next ten years? Maybe. The jury’s still out on whether or not Bitcoin is actually secure over the long run. It’s been a decade, which is pretty good, but it’s still an experiment. But it’s looking like it could be a new way of raising capital sending value around the world.”

Reddit co-founder Alexis Ohanian, who now runs an early-stage venture fund, said he applies crypto to his investment portfolio, but that there’s still plenty of risk.

“As an asset class, I aim for about 10 percent of my net worth in crypto, and my bet simply being if this future that we hope for technologically pans out, this will be a really material investment, but it’s still tremendously risky.”

Finance Gets Into Crypto

Several established exchanges and financial firms have launched crypto products, including Fidelity’s recent announcement of a crypto trading platform. Panelists, which included Dan O’Prey of Digital Asset, says these products are well-thought out despite many of them coming online during a bear market for major crypto assets like Bitcoin.

“They’re probably looking at the long-term trend here. This isn’t just a ‘What’s the price today, and what’s the interest,” says O’Prey. “They’re building out the infrastructure to enable access that their customers want to see.”

Each of the panelists agreed that the applications of crypto and, more broadly, blockchain to the financial system will have a real impact on some existing systems.

“The real projects, such as the one that the ASX (Australian Stock Exchange) has, they’re literally replacing their entire post-trade system for equities with a distributed ledger with a Digital Asset platform. As the hype dissipates, people will focus more on what’s real, what business problems can we actually solve.”

There’s also reason for confidence for crypto adapting to the financial industry because of who is building the technology. Many of the key startup founders in the space have found previous success in technology, and many come from the financial world, says Ohanian.

“The real interesting infrastructure solutions that are being built now for the enterprise are usually coming from founders who have spent time in finance, who already have the relationships there. Who were tapping into their r/bitcoin subreddit during work hours with their wheels spinning trying to figure out a way to do their job better, cheaper, faster.

Cryptos Decentralized?

Moderator Laura Shin asked if the decentralized legacy of cryptos might find friction with adapting to the largely centralized world of finance.

“What I think has always been true in technology, is users will gravitate towards the better user experience,” says Ohanian. “I think what we’re going to see in the next 10 years is going to look a lot more like traditional finance just done better, cheaper, faster than the Utopian crypto future.”

“I think with decentralization, people often get caught up with thinking that’s the goal,” added O’Prey. “Censorship-resistant cash was the goal, and decentralization was a requirement in order to achieve that goal.”

Author: Seeking Alpha Team
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Bitcoin Will Not Challenge Gold as a Safe-Haven Asset: Equity Analyst

Though many bitcoin investors believe multi-layer scaling solutions such as the Lightning Network (LN) will eventually make BTC a viable payment instrument for the proverbial coffee purchase, most argue that the flagship cryptocurrency’s primary short-term use case is as “digital gold.” However, an equity analyst at one of the world’s most respected investment research firms said that he doesn’t expect bitcoin to make a noticeable dent into the yellow metal’s market share.

Analyst: Bitcoin Won’t Steal Gold’s Shine

Writing in Morningstar Research Services’ short-form investment commentary series, the “Morningstar Minute,” equity analyst Kristoffer Inton noted that if bitcoin did begin to replace gold as a safe haven asset, it would represent a “seismic shift” in the investment case for the precious metal as 40 percent of gold demand comes from investors.

“If cryptocurrency were to displace gold’s investment case, the implications for gold prices would be devastating. 40% of gold demand relates to investment, so a shift in investment from gold to cryptocurrency would be a seismic shock.”

However, Inton, who has been at Morningstar since 2013, wrote that the firm has created a proprietary framework for evaluating assets as stores of value and found that cryptocurrency does not score well on this rubric, leading him to continue recommending long-term investments in certain gold stocks, including Goldcorp.

“In order to assess the threat, we’ve created a framework to grade any asset class’s viability as a safe haven by focusing on liquidity, functional purpose, scarcity of supply, future demand certainty, and permanence. Through this framework, we conclude that cryptocurrency does not and will not challenge gold as a safe-haven asset class.”

The Case for ‘Digital Gold’

Bitcoin vs. Gold

Nevertheless, cryptocurrency bulls maintain that bitcoin does have a solid investment thesis as “digital gold” because, although it is currently quite volatile, it possesses many of gold’s attractive features (e.g. liquidity and scarcity) while also alleviating some of its drawbacks, such as its lack of portability and impracticality for payments.

Billionaire investor Peter Thiel, for instance, said earlier this year that he is long on bitcoin, even if it never matures as a payment instrument.

“I would be long bitcoin, and neutral to skeptical of just about everything else at this point with a few possible exceptions. There will be one online equivalent to gold, and the one you’d bet on would be the biggest,” he said. “I would be long bitcoin, and neutral to skeptical of just about everything else at this point with a few possible exceptions. There will be one online equivalent to gold, and the one you’d bet on would be the biggest.”

Featured Image from Shutterstock. Charts from TradingView.

Author: Josiah Wilmoth
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Bitcoin Will Become a Global Reserve Asset – Xapo President

The president of Xapo, Ted Rogers has predicted that Bitcoin will become the future of the global reserve asset. The possibility of the cryptocurrency becoming part of the list of currencies in the Special Drawing Right (SDR) of the International Monetary Fund (IMF) has been ruled out by some experts for some reasons.

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According to him, the tendency for Bitcoin to achieve this feat is so high that questions about its future should be “when”, not “if”.  “It’s a question of when not if Bitcoin is going to become the global reserve asset for individuals, institutions, and governments, “he said. He added that Bitcoin is going to replace gold: “It is going to replace gold and it may also become a ubiquitous global currency.”

Foreign reserve assets or currencies form parts of the International Monetary Fund’s SDR. The SDR was designed in 1969 by the IMF to support global trade when gold and the US dollars were in shortage.

Currently, the SDR consist of the US dollar, pounds sterling, Chinese Yuan and Japanese Yen as reserve assets. Considering the fact that these are reviewed every five years, there is the possibility that Bitcoin can dine with the above listed currencies in the future.

There have been many times the cryptocurrency has been subjected to intensive criticisms. Some experts have labelled Bitcoin as a scam, and the cryptocurrency market as a fraud.

The Twitter CEO holds a higher hope that Bitcoin will surely be the future of finance. Rogers has been said to hold $10 billion worth of Bitcoin in an underground vault, hence having a fair hope in the digital asset. Rogers also said in an interview that the Bitcoin price will stabilize for the few days ahead.

“Over the next 7 to 14 days, I kind of expect it (Bitcoin’s price) to be not too far from where it is now,”he said.

Some analysts believe that there is no way Bitcoin can become part of the SDR. According to them, it can form a part of individuals’ unofficial reserves but has no future as it is portrayed to be.

Bitcoin has struggled to win the hearts of many countries to become a global denomination. Even when Bitcoin transaction becomes universally possible, it will still struggle to have the support of global economies.

The cryptocurrency has not disappointed after its introduction. It has become a payment option of some renowned institutions and still has the potential to become a backbone of the future financial market.

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Author: John Kojo Kumi
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