Over the past year, the general public’s sentiments toward cryptocurrencies (virtual currencies) have deteriorated significantly. So, at least until there is more certainty about the market and the drivers that move it, there may be a mindset to stay away from crypto.
But if we take a long-term view, we can see things differently. Crypto-assets are still new technology, and new technology always has an adoption curve. And a good way to measure it is “Metcalfe’s Law”. The effect of the network is the square of the number of nodes in the network, so if the network has 10 nodes, its intrinsic value is 100 (10 x 10).
Given that crypto-assets are in the early stages of their evolution (indeed, they are), they have unrivaled potential to grow exponentially. It’s not a perfect analogy, but the toughest time to buy Amazon stock was the 2000s, when the company was stagnating. But in retrospect, of course it was time to buy.
In addition to their potential, crypto-assets and blockchains are becoming defined by characteristics such as decentralization, security, transparency, efficiency, innovation and financial inclusion. Many of these characteristics are attractive when examining macroeconomic conditions for investment. After a tough 2022, when nearly every asset class fell and traditional 60/40 portfolios performed their worst in more than 100 years, to rebuild and grow portfolios, the future It is important to be open to the possibilities of
Possibilities of crypto assets and blockchain
There are many big problems in America. With record debt-to-GDP ratios, a depreciating dollar, and an aging population with no end in sight.
How do we find opportunities to overcome these challenges?
It is important to recognize that the economy often takes time to reflect economic conditions. Expect worsening earnings, a credit crunch, and uncertainty around the Federal Reserve. One solution is blockchain and crypto assets.
There are several reasons why investing in crypto assets makes sense. These include diversification, high growth potential, cutting-edge technology, inflation hedges, and self-custody. The question is what percentage of the portfolio should be allocated to crypto assets.
As the U.S. Securities and Exchange Commission (SEC) stubbornly refuses to approve Bitcoin (BTC) spot ETFs (exchange-traded funds), investors should avoid investing only in a single crypto asset and avoiding risks from third parties.24 What options do you have to keep up with the 24×7 crypto market?
Warren Buffett once said, “Be vigilant when others are greedy, and be greedy when others are wary.”
Now is the time. To look to the long-term future, we must free ourselves from the noise of everyday life. Will crypto assets continue to rise in 5, 10, 15 years, and beyond? I think it will, and just as investing in Amazon in the early 2000s was smart, researching crypto now and allocating a portion of your portfolio is a smart move. .
Crypto-assets and blockchain are important as new ways to manage and secure financial transactions, increase transparency and accountability, and enable innovation across a wide range of industries.
Debt underpins the global economy. As debt rises and credit tightens, all facets of the market face challenges. Ultimately, it will devalue the fiat currency.
The US dollar remains the world’s reserve currency for now, but there is no guarantee that it will remain so in the future. Ultimately, all fiat currencies depreciate. Because the system is like that.
As an investor, it’s important to maintain purchasing power. Going forward, 60/40 portfolios and traditional asset management strategies will not suffice. That’s why investing in crypto assets is a responsible decision in the future, in order not to miss a big opportunity.
Cryptoassets as an asset class are directly tied to international liquidity. This faucet cannot be closed. As the money supply increases over time, we need to be prepared to profit from such an environment.
What position will commercial real estate hold in a new world where ‘work from home’ is the norm?
Office vacancy rates will rise to a record high of nearly 13% in Q1 2023. higher than after the 2008 financial crisis. Commercial real estate loans account for nearly 40% of bank lending. This problem, and the new risk of bank runs fueled by smartphones, are adding pressure to the system and further complicating matters. Crypto assets expand the tools for dealing with such situations.
Given that the system is debt-based and Fed Chairman Jerome Powell is in big trouble, it’s time to consider alternative investment options. No single solution is a panacea, but a combination of strategies increases the chances of a successful investment.
｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Original: If Crypto Is the Future, Advisors Need to Embrace It Now