Digital Assets
Digital Assets Could Redefine & Rival Traditional Asset Classes
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For 13 years and counting, the digital asset ecosystem has slowly expanded and established itself as a presence set to be here for the foreseeable future. Despite its impressive growth over this time, there is still massive potential that has yet to be realized. In fact, investment funds like ARK Invest believe that by 2030, traditional asset classes will rivaled by their digital variants.
Based on its research shared in a report titled ‘Big Ideas 2023‘, ARK Invest believes that by 2030 digital assets will boast a market capitalization of roughly $25 trillion. Of this total, $20T will be attributed to cryptocurrencies, while the remaining $5T will represent smart-contracts.
Source: Ark Invest ‘Big Ideas 2023', Page 54
ARK Invest is not alone in its future expectations for digital assets. Others like the Boston Consulting Group (BCG) and ADDX have forecast that by 2030, asset tokenization alone will represent a $16T opportunity, equating to roughly 10% of global GDP.
Market Participants and Innovators
Before we take a closer look at how digital assets can achieve these lofty expectations in the coming years, the following are a few companies of note for investors looking to gain exposure to the sector.
Coinbase (COIN)
Over the years, Coinbase has evolved from being a simple exchange to offering a comprehensive suite of products for the digital asset enthusiast. In addition to this, it is widely regarded as one of the more trustworthy and regulated companies within the sector. Through offerings like Coinbase Custody, Coinbase Prime, and more, the company holds appeal to both retail and institutional investors alike.
Based out of California, United States, Coinbase was founded in 2012 and employs ~3,500.
INX (INX)
INX is a digital asset exchange built for the future, supporting a wide array of digital asset classes. While the exchange maintains a focus on digital securities, INX also provides access to digital assets like Bitcoin, Ethereum, and more.
Investors that believe in INX and what it is trying to achieve, can gain exposure to the exchange through INX Tokens. These tokens are particularly noteworthy, as they represent ‘the first SEC-registered security token to IPO on the blockchain'.
The comprehensive platform on offer by INX is made possible through operations spanning Canada, United States, and Gibraltar.
MicroStrategy (MSTR)
At this point, MicroStrategy stock is essentially a proxy for investing in Bitcoin (BTC) itself. For multiple years now, MicroStrategy has rapidly been accumulating BTC for holding in its treasury, as the company believes it is the ultimate hedge, and the currency of tomorrow.
Aside from its operations as a software and analytics company, MicroStrategy has now embarked on various initiatives meant to further development of Bitcoin scaling solutions like the Lightning Network.
In 2022, MicroStrategy boasted a revenue of nearly $500M.
Use-Cases Set to Expand the Digital Asset Ecosystem
So how exactly do investment funds like ARK and consulting firms like BCG expect for digital asset to achieve such a lofty market-cap by 2030? There is no single answer. Rather, it is the flexibility/versatility of blockchain technology that will allow for a variety of sectors to be transformed. The following are a few examples of what these may be.
Asset Tokenization
To date, the tokenization of real estate appears to be one of the more promising examples of how such market-caps can be achieved. Despite the potential for ownership of real estate to provide hearty returns, the asset class is traditionally plagued by low-liquidity and inefficiencies – each issued solved through tokenization.
Tokenization of real estate can also occur in both a commercial and residential setting. One example of a commercial real estate tokenization effort that has done well over the past few years is St. Regis Aspen Resort and its security token called ‘ASPEN COIN‘.
Beyond real estate, various niche applications of tokenizing real-world assets have popped up over the past few years. These include art, cars, whiskey, wine, and more.
Debt Products
Digital securities go beyond tokenizing tangible, illiquid assets. We are now seeing an increasing amount of companies and governments opting to tokenize financial products such as bonds. Most recently, this was on full display by the following,
By taking such an approach, issuers are able to complete such initiatives in a more timely manner, while also benefitting from the cost savings by eliminating the need for unnecessary third parties.
For those interested in learning more about such bond offerings, we recently highlighted various other examples HERE.
Stores of Value
Perhaps future marketcaps will not be facilitated by reimagining how we invest in real world assets. Perhaps they will come from making select examples obsolete altogether. An example of this may one day be Gold – a store of value often noted as being the low-hanging fruit for Bitcoin to steal capital from.
If Bitcoin continues to boast increased adoption, many believe that its volatility will diminish. Although this has yet to occur, combined with its fixed supply, ease of transport, global presence, and lack of a centralized controlling body, it is not hard to envision a scenario in which this could happen. If it does, Golds $12T marketcap may quickly diminish as capital flows into an asset built for the future.
Remittance / Cross-border Transfers
Whether it be Bitcoin, a stablecoin, or some other project, the use of digital assets in cross-border transactions and the remittance industry has the potential to be game changing. If the use of digital assets in such scenarios becomes the norm, it will mean massive adoption on a global scale.
This particular use case continues to show promise, as various countries in which remittance plays an important role are showing increasing levels of adoption, as digital assets like Bitcoin can be transferred as easily to someone on the other side of the world as they can to someone sitting next to you. In addition to this, the cost and speed of such value transfers remains the same.
Payments
Bitcoin in particular appears to have the best chance at succeeding as a viable form of payment for everyday goods. Sure, there are other projects that are quicker than Bitcoins base layer, but they do not boast the same levels of adoption and first movers advantage. Furthermore, the belief that Bitcoin is too slow and expensive for function for everyday purchases is no longer a valid argument with the advent of the Lightning Network.
The Lightning Network in particular is a layer-2 solution that transforms Bitcoin into a platform which can handle millions of transactions per second, each costing fractions of a penny, near instantaneously. As this solution continues to grow, and become more accessible to the masses, it has the potential to allow for Bitcoin to truly begin stealing market capital from not only rival digital assets, but traditional currencies as well.
Final Word
Each of the above examples are but a few of the scores being developed each day. When looking at the versatility of digital assets to change the way we invest and interact with so many asset classes, it is hard to not envision a future in which they rival or redefine the status quo.
