About Us Our Work News Contact NEWS Blockchain as an Asset Class: Why Investors Should Pay Attention Blockchain assets were the best-performing asset class over the past decade. Studies show that even the most conservative investors should seek blockchain exposure. „Blockchain is the most important invention in the history of the world since the internet,” said the American investor and entrepreneur Marc Andreessen. Likewise, Goldman Sachs believes blockchain “can change everything.” If the world’s financial elite speaks that highly of a new technology, investors should get involved. Although blockchain is just a simple database technology, it is incredibly powerful because it solves one of the key challenges of digitalization: Before the invention of blockchain, it was easy to copy or manipulate digital information. Blockchain-based data, however, is immutable, meaning nobody can change, duplicate, or delete it. This level of security opens an entirely new range of digital opportunities, especially in the financial industry, where data security is crucial. Digital currencies: the first blockchain use case As blockchain provides a secure way to store digital information, businesses can use it to digitize every asset class such as stocks, bonds, real estate, precious metals, and even arts. Today, the most prominent use case of the technology are digital currencies, which allow users to send and receive money without the involvement of banks. In digital currency networks, a blockchain database serves as a decentralized ledger that records transactions, making banks as a bookkeeper redundant. Instead of a bank acting as the middleman between two transacting parties, the blockchain network governs the transaction. Exchanging money this way is safe, cheap, and fast. That’s why blockchain-based currencies are the future of money: The technology that will fundamentally change the way how we conduct financial transactions. Blockchain as an asset class: superior risk-return-performance Besides its use case as a means of payment, digital currencies provide opportunities for growth investors. Since the inception of Bitcoin – the leading digital currency by market capitalization – the asset has gained about 9,000,000 percent in value in just ten years. That makes Bitcoin the best-performing asset of all time. While Bitcoin also shows high volatility – price swings of more than $1,000 within just a few hours of trading are not unheard of – investors do get compensated with higher returns. Looking at Sharpe Ratios, a measurement for risk-adjusted returns, Bitcoin has beaten every other asset class over the past five years. Source: www.invao.org The stellar risk-return-profiles of digital currencies benefit conservatively diversified investment portfolios. A study by Binance research shows that small Bitcoin allocations of 1% to 5% can boost the performance of a multi-asset portfolio without significantly impacting its volatility and its maximum drawdown. Thus, blockchain-assets improve portfolio returns without exposing investors to excessive risks. Portfolio diversification: downside protection with uncorrelated blockchain assets Another reason why blockchain-assets have grown in popularity among investors is their non-correlation with other assets. Non-correlation means, if other asset classes lose in value, blockchain assets won’t be affected. Mixing blockchain assets with other asset classes provides downside protection, as blockchain assets can compensate for the losses of traditional portfolio assets during a recession or a temporary market meltdown. Source: www.invao.org The above table shows that over the past three years, Bitcoin showed a low correlation coefficient with all other non-crypto asset classes below 0.10. Thus, the price movements of these assets do not significantly impact the price of Bitcoin and vice versa. The going recommendation: Invest 1% to 5% in blockchain assets The million-dollar question is not whether an investor should invest in blockchain assets, but how much? Binance research suggests a portfolio allocation of 1% – 5%, depending on the investor’s individual risk preferences. This recommendation corresponds with studies by Yale researchers, which also suggest investors should invest up to 6% – or more, depending on their risk appetite. On that note: The endowment funds of the leading Ivy League universities, Yale, Harvard, Stanford, and MIT all invest in digital currencies. Could the asset class possibly get a better endorsement? How the Aramco IPO Could Impact Saudia Arabia and the World; the Bigger Picture. READ MORE Blockchain as an Asset Class: Why Investors Should Pay Attention READ MORE ALL NEWS ... About Us Our Work News Contact KEEP IN TOUCH with tomorrow and sign up for our newsletter SUBSCRIBE NOW © 2021 by Kingdom Investments LLC. All rights reserved.