Digital assets are a new asset class
Over the past 14 years we have been witnessing the incredible growth of the digital asset phenomenon.
Bitcoin was the first scarce digital asset and is still by far the most traded and largest by capitalization.
It stood out for its practically unique characteristics of:
· decentralization, i.e. no centralized body governs it except the entire community
security, i.e. the bigger the system of nodes and miners becomes, the more the protocol becomes secure, unassailable and resistant to censorship
· semi-anonymity (pseudonymity), i.e. everyone knows that the transactions have taken place but nobody (or almost) knows who they belong to, making it a de facto tool for protecting one's assets.
Bitcoin was born to provide an alternative to Banks, fallible legal entities governed by people often devoted to profit and not to the protection of the customer and to Central Banks, not always completely independent from the governments of the countries that host them and which on some occasions fall into the temptation to expand the monetary base at the expense of citizens' purchasing power.
It was 2008, October 30 to be exact, when Satoshi Nakamoto published the whitepaper on Bitcoin, just 45 days after the bankruptcy of one of the five largest banks in the world at the time, with the name of Lehman Brothers, which created a hole of more than 600 billion dollars...
A lot has come a long way since then, with the birth of various cryptocurrencies, which have imposed themselves to satisfy different use cases with respect to Bitcoin and introduce new features, or have gathered around them a community of enthusiastic users who have adopted.
The most successful case is Ethereum, which has introduced Smart Contracts, digital contracts that are finding application solutions in the most diverse economic fields, and has allowed the birth of DeFi, an acronym for Decentralized Finance, which has created incredibly rapid and effective solutions for offering alternative solutions to the traditional financial world in the digital world.
Then more efficient alternatives developed and are rapidly growing, among which we mention for example Polygon, which offers a decentralized scalability solution for Ethereum Smart Contracts, Solana, which offers an alternative consensus system to the expensive Proof of Work (Proof of History), and Algorand, which seeks to propose a context more pleasing to institutions and regulators.
In short, although Bitcoin maintains unique characteristics for which it is considered by most to be a form of digital gold, we are facing a new business and investment segment linked to Crypto Assets, with companies that generate revenues, businesses and economies around their projects and their "tokens".
Just think of the recent listing of Coinbase, a Digital Assets exchange that is valued in terms of capitalization (but also of turnover) more than the Nasdaq itself... which is the exchange that hosts it!
To these so-called "Cryptocurrencies" has recently been joined by the market for Non Fungible Tokens, representative of digital collections and works of art. If a currency is considered a fungible asset when it is exchanged, i.e. a banknote is considered to have the same value as another banknote of the same denomination, relative to an object belonging to a collection
This new investment category presents a mix of differentiating characteristics, which leads us to consider it as a real asset class in portfolio logic. Among these we mention:
digital scarcity (so Bitcoin is often compared to gold)
permissionless technological innovation (bottom-up enablement of new technologies and use cases)
decorrelation with traditional asset classes, more accentuated in some market phases, which make it a differentiating factor in portfolios
· attractive potential return profile with accentuated asymmetry characteristics
In order for this new asset class to be considered as an investment, the ability to analyze totally new metrics and parameters compared to traditional asset classes is a critical success factor, such as:
· adoption rate and community interaction
· tokenomics and issuance curve
· transactional and dimensional metrics
Consent templates used
These examples should correctly perceive the importance of relying on a specialized intermediary who offers the possibility of accessing this complex market through regulated and protected financial instruments, such as a mutual fund.
We will continue to talk about it in the coming weeks, in the meantime like and share if you find these topics interesting, thank you.