Crypto 'next asset class'

A United States investment manager says cryptocurrencies are set to become the first new asset class since the 1600s.

Tuesday, September 11th 2018, 6:00AM

by Susan Edmunds

Catherine Wood

Catherine Wood, chief executive of Ark Invest, said crypto assets could become part of the corporate capital structure.

Ark has partnered with Niko to launch a Global Disruptive Innovation Fund.

“Bonds are based on fixed assets, equities are claims on excess cashflow derived from those assets. Crypto assets will be structured based on the capacity utilisation of those assets,” she said.

Wood said she had wondered why digital assets such as storage, computing power and bandwidth had not been traded when they were as valuable to people as copper or oil. “The reason is we’ve not been able to do this. Now with blockchain technology, we’re going to be able to.”

That would lead to new products being built up around digital assets, she said. “In the say way we have REITs around real estate we’ll have products built around digital assets. Before this digital ecosystem evolved there was no way to do this.”

She said Bitcoin had the best shot at becoming the global digital currency, or the reserve currency.

The dramatic fall in the value of cryptocurrencies had been less tough on Bitcoin than it had on others, she said. That flight to safety had increased Bitcoin’s share of the crypto asset eco system from low 30% to high 50%.

Bitcoin fell from US$20,000 to less than US$6500. Ethereum dropped from US$1368 to US$196.

“That’s a clue to us that Bitcoin will be the reserve asset of the crypto asset eco system.”

She said investors should have some exposure.

An Ark analyst had discovered that Bitcoin’s transaction volume was now bigger than PayPal, with an average transaction size of $30,000.

It was being used in places where it was difficult to do cross-border business-to-business transactions, she said, and where people wanted to sent remittances back to their families. “There’s a huge unmet need in international markets.”

Tags: cryptocurrency Nikko AM