Asset Management 2020
Asset Management 2020

By Rondo | Cryptoverse | 15 Jan 2020

In this new digital age, there are several important realities about how wealth really works. A great deal of wealth exists only on paper when you try to sell your assets, the price goes down. Liquidity is the ability to sell an asset for cash and is an important factor that tends to be forgotten when calculating net worth.

Real wealth doesn’t actually come from golden hoards. It comes from the productive activities of human beings creating things that other human beings desire. De Beers’ fabulous fortunes were generated ultimately not from its control over a certain type of dazzling precious metal, but from their ability to convince the world that this precious metal could be used to communicate love, devotion, and desire.

“If you want to get rich, don’t think about how to seize scarce resources. Think about how to use resources in an innovative way to make something people truly want or need it”

The traditional theory says that an “asset class” is a group of financial instruments that have similar financial characteristics, and behave the same way in the market place, quite a sweeping statement that in reality is quite a paradigm shift in the blockchain universe.

Blockchain tech simplifies many of the processes and actions in managing digital assets (i.e portfolio management, trading/transactions of cryptocurrencies) and encryption further reduce errors in the process as well as increases security. Blockchain tech further eliminates the need for physical identification and replaces it with digital ID’s. Thus resolving the issue of ID theft, which could be argued is also a form of asset management. Furthermore one of the primary benefits of blockchain technology is it’s immutability the “unchangeable” character of the “ledger” and the data transferred to the network.

Recent reports show that the asset management industry “financial institutions and investment funds” could cut costs by $2.7 billion every year simply by diversifying and innovating in blockchain tech. The practical applications of blockchain tech in the financial services industry include client screening and onboarding, record keeping, data privacy, and security, as well as trade processing.

But where does the value of digital assets come from? Here are some logical rules that apply for valuing crypto tokens, regardless of whether it is for a seed-funding round, further funding, or for publicly traded tokens. However, token valuation can be tricky sometimes as most classic models fail to cover the volatility that is so pervasive in the token economy. Traditional businesses operate on a simple for-profit model: essentially, the shareholders pre-finance a venture and distribute the profits among themselves. This makes it possible to evaluate the shares based on real consumer-related data and forecasted cash flows.

On the contrary, crypto ventures operate on the opposite principles of a sharing economy, where it is often unclear which parties generate any sort of economic value through the crypto network. Oftentimes, value accumulation for cryptocurrencies or utility tokens comes about through increasing demand. It is, therefore, more important to identify the drivers of token value. For example, the value of “hard” cryptocurrencies that were designed primarily as a payment method (utility token), is mainly driven by the ability to pay with the currency. In other words, the main question one should ask when valuing these is “Will more people use the cryptocurrency if more service providers/vendors start accepting this cryptocurrency?”.

There is now a clear requirement, crypto asset management tools are rapidly emerging to assist retail investors with their exploration of the market. For the companies behind these platforms, the incentive is clear, the market capitalization of cryptocurrencies is nearly $230 billion, and it’s already showing signs of stabilizing. As such could rival traditional markets on a global scale and grow into a Trillion dollar ecosystem. Therefore a more mature market also means that more knowledgeable investors are likely to have more confidence in this fledgling asset class, requiring in tandem platforms that deliver easier access compared to the fragmentation that currently defines the crypto trading ecosystem. 

Digital asset management is fast developing into a vast ecosystem with many different types of cryptocurrencies so let’s look at Bitcoin the most prolific crypto-asset also known as the original cryptocurrency. Below is a recent overview of Bitcoin’s performance metrics, this is fascinating and puts this digital asset class into perspective.


DeFi (Dencentralized Finances)

This decentralized innovation already concerns traditional banking and finance monopolies, as Fintech companies are dominating the world of finance in aspects such as: Money transfers, loans, purchase, and sale of securities or financial and investment instruments. Several institutional experts insist that FinTech laid the foundations for DeFi (Decentralized Finances) but that is subjective to a fault. Although more broadly we can say that DeFi is the result obtained from applying the decentralized technology of blockchain platforms to all the advantages offered by FinTech.

"We can define DeFi as the evolution of an alternative financial system, which works under the concepts of decentralized governance, neutrality, privacy, inclusion, openness and above all transparency.”

Some clear attributes emerge from the application of blockchain tech in the context of DeFi

  • Flexibility
    Government legislation over the entire traditional banking system has created an environment that is overbearingly bureaucratic and complex which is not easy for ordinary users and companies to navigate, regardless of their size.
  • Automation
    The vast majority of Fintech operate under the SAAS (Software As A Service) format.
    This concept allows to automate processes that are traditionally expensive in terms of Human Resources, time and hours, which exponentially increases the costs of the investment for companies and entrepreneurs, in this way the risk represented by the levels of "Error is drastically reduced, making the return on investment more efficient and increasing confidence levels.
  • On-Line (Real-Time 24/7)
    Because the fundamental value of the assets can appreciate in Real-Time 24/7, this allows raising the level of awareness for strategic decision making, allowing investors and traders to analyze the KPI's (Keys Performance Indicator) as they change, with real numbers and without any lag.

As a result of this fluid and dynamic market, some companies are introducing tools that are now commonplace in more traditional financial markets—asset management. Instead of having to manage multiple accounts and wallets, crypto asset management platforms are simplifying the process by helping users consolidate their diverse holdings while simultaneously providing improved portfolio management tools and security. Even so, most traders in the ecosystem still manage their own investments, and there are several platforms that have established themselves as go-to tools, with new ones emerging every day.

There are already several funds that offer crypto asset management and invest on behalf of customers. So far, this model has shown strong results, with the soaring popularity of the crypto asset class, institutional investors are taking note, and research that suggests that the number of crypto investment funds could double in 2020.

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