Asset Classes

Cryptocurrency

Cryptocurrency

Cryptocurrencies
Currency

A form of digital or virtual currency secured by cryptograph, Cryptocurrency is a digital medium for exchange. Cryptocurrencies are decentralized networks based on blockchain technology, rendering them immune to government interference or manipulation. Cryptocurrencies face criticism for a number of reasons, including their use for illegal activities, exchange rate volatility, and vulnerabilities of the infrastructure underlying them. However, they also have been praised for their portability, divisibility, inflation resistance, and transparency.

More About Cryptocurrency

  • Crypto Currencies can provide people with an easy way to send and receive wealth (even when their home countries currency is worthless or in rapid decline)
  • Allow individuals, companies and countries to escape the control of central banks and regulations
  • International Assets - they are accepted all over the world without need to be exchanged for local currencies/assets
  • Serve a similar function to gold, but may have more upside since they are not yet widely adopted
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  • Governments are not able to control cryptocurrencies like they can fiat currencies
    • They can't block payments
    • They can't freeze accounts
    • They can't seize assets

Cryptourrency Facts
  • Based on globally, decentralized & distributed networks (no one person is in control)
    • Puts the power in the hands of the broader community
  • Many currencies have a way to increase supply
    • Often this requires "mining" (analagous to physical previous metals)
    • The supply increase is often limited to a certain amount/% per period of time


Crypto Currency Benefits (Often Compared to Fiat Currencies)
  • Typically come in fixed quantities (no one can print as many as they want)
  • They are decentralized - the government can't control them.  Power is not in one peron's hands
  • They don't require banks to safely hold (no risk of bank failure) 
  • The supply of coins/money/token is strictly regulated and/or limited (unlike fiat currencies)

Crypto Currency Risks
  • Governments may try to regulate our outlaw them (they take power away from central governments)
    • Some countries have already tried to outlaw
    • Mitigation:  It will be hard for governments to take don a decentralized system
    • Mitigation: Other countries are actively investing in crypto technologies and encouraging crypto businesses
    • Mitigation: Governments were unable to stop other distributed technologies (example:  Bit Torrent)
  • Quantum Computing could render the encryption that backstops the system
    • Currencies can use algorithms that are safe from quantum computing


    • Hacking and Theft is common - nearly $927 Million stolen in first 3 quarters of 2018

    Crypto Currency Using Classic Definition of Money

    • It is a medium of exchange
    • It is a unit of account
    • It may or not be a store of value
      • Wild price swings may indicate that it is not a good store of value (depends on confidence of holders)


    Government Sponsored CryptoCurrencies