For those who feel they have "missed the boat" on crypto assets
Recent price increases may have some investors interested in crypto assets (virtual currencies) feeling they missed an opportunity: bitcoin (BTC) is up 50% since the beginning of the year and 135% in the last 12 months.
However, when we broaden our perspective to the transformative nature of blockchain technology and its relatively small current use, we can see how much of the potential economic impact of crypto assets remains untapped.
Separate blockchain from bitcoin
Investors who focus solely on Bitcoin's current price increase and its potential economic benefits - which are certainly substantial - are overlooking the fundamental driving force behind the value proposition of crypto assets to the broader global economy: blockchain technology.
The use cases for blockchain to support a wide range of transactions and interactions with information go far beyond a single asset like bitcoin and have the potential to increase efficiency in a variety of industries.
The chart below provides a big-picture view of the size of the market opportunity for crypto assets by specifically identifying areas that are particularly ripe for blockchain innovation.
The industries and assets for which blockchain is suited to improve efficiency are surprisingly diverse, with a surprisingly large number of basic use cases; some representative examples are
• Financial Services: The value proposition of decentralization in financial services spans asset management, trading, insurance, and payments.
• Entertainment & Gaming: Decentralizing content distribution, improving royalty payments, and providing a secure in-game monetization method are just a few of the entertainment and gaming-related applications of blockchain technology.
• Information Technology Infrastructure: Secure, decentralized data and computing power provide more efficient infrastructure solutions for technology-enabled businesses.
• Fixed Income: Tokenized U.S. Treasuries surpassed the $1 billion (150 billion yen, at 150 yen to the dollar) mark this month, an early milestone in the real-world asset (RWA) tokenization movement across asset classes.
• Real estate: smart contracts fit very nicely into a variety of real estate use cases, including ownership transfers, recurring rental payments/yields, financial derivatives, etc. Using smart contracts in this way can disrupt (creatively disrupt) many industries where brokerage brokers stand between buyers and sellers.
• Value Preservation and Transferability: also the value proposition of classical bitcoin, the features of cryptographic assets (portability, divisibility, scarcity, etc.) make them potentially comparable to gold and legal tender as a means of value preservation.
Conclusion for new (and old) crypto asset investors
Instead of asking themselves, "Did I miss an opportunity?" potential crypto asset investors should ask, "Do I believe in the transformative power of blockchain technology?
"Investing in crypto assets should be a statement of belief in the far-reaching value proposition of blockchain technology, from the various industries that comprise the macroeconomy to the transactions that encompass everyday markets and human experience.
For crypto asset investors to fully capture the value proposition of blockchain innovation, a thoughtful multi-asset approach to portfolio construction and ongoing management will be critical.
