Released this Tuesday (20), a study carried out by the cryptocurrency company Fidelity Digital Assets shows that seven out of ten institutional investors intend to invest in digital assets in the future. Although market volatility is still frightening, more than half of the 1,100 interviewed at the request of the Greenwich Coalition between December 2020 and April this year stated that they already have some digital investment.
The growth in investments is explained by the fact that the format is capable of covering a much wider range of initiatives, including international ones. Digital assets also bring greater geographic flexibility: using a mobile phone or portable device connected to the internet, a person can trade from anywhere in the world, breaking barriers imposed by location and even national currencies.
What are digital assets?
Digital assets can correspond to texts, websites, images, company profiles on social networks and any content found on digital platforms. Generally, the biggest investments are related to financial digital assets, which can refer to centralized virtual assets — such as company shares and loyalty points located in private databases — or cryptocurrencies.
Names like Bitcoin, Dogecoin, Ethereum and Litecoin (among many others) are especially attractive for their value and security. Among the elements that highlight these digital assets is the use of technology blockchain, which records transactions in a decentralized and transparent manner. All purchases and transfers are protected by encryption and have their information stored on millions of computers, preventing fraud and double expenses.
In the financial world, the tokens, records of virtual and non-transferable items that can be transferred, bought and sold. They differ from cryptocurrencies in that they do not represent financial transactions per se, but they also take advantage of technologies such as blockchain to ensure security, transparency and agility in transactions.
It is worth noting that cryptocurrencies and tokens they don’t correspond to the entire universe of digital assets — which can be blogs, lead bases, software and several other types of files. For a file to be considered a digital asset, it needs to be easy to find and access, a process usually done with the help of metadata that manage systems.
Unlike hard assets, which are easily quantifiable and easy to exemplify—think real estate, equipment, or a tool you can sell or lend, for example—digital assets are more complex to quantify. Therefore, they demand more attention in their management, especially as they often correspond to the touch points between brands and consumers.
What are the advantages?
The digital asset market is especially attractive for its accessibility. By breaking down physical and geographic barriers, they allow anyone to become an investor, as well as making room for more assets to be valued and traded — something that has attracted the attention of specialists and investment fund managers.
Digital assets are also attractive by reducing intermediaries, ensuring that processes become faster and cheaper. Other advantages include greater transparency (anyone can consult the blockchain, for example), more security and democratization of access.
Another aspect that draws attention is the potential for appreciation, represented mainly by cryptocurrencies. According to a survey conducted by Fidelity Digital Assets, 90% of companies surveyed want to invest in them over the next 5 years — Bitcoin, the symbol of this market, rose by 400% before the current downward trend.
What are the challenges?
Like any new market that attracts a lot of investment, the digital asset segment is still experiencing “growing pains” and is especially susceptible to speculation. According to a survey by JPMorgan Chase & Co, fluctuating Bitcoin prices cause only 10% of institutional investment firms to trade cryptocurrencies, and half of them label digital currency as “rat poison”, believing it to be a fad.
A similar situation affects the market for Non-Fungible Tokens (NFTs) — tokens cryptograms used to authenticate a unique piece on the web—usually linked to the art world. After initial momentum, the market showed signs of slowing in early June, registering a drop in the number of transactions in some segments.
Despite the ease and security they provide, digital assets accompany at least one aspect of traditional investments: they must be well studied and not necessarily bring guarantees of immediate returns. As this segment grows and transforms, new opportunities and challenges must arise, and it is necessary to be connected to them to make investments in an intelligent and responsible manner.