Cryptocurrencies: a new asset class – or not?

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The headlines are enough to give one indigestion: ‘Cryptos experiencing downward volatility again’, ‘The bears take another bite out of the cryptos’, ‘Bitcoin falls under $3 400 as top cryptos see losses’.

It wasn’t too long ago (in 2017, in fact) that Hunter Horsley, co-founder and CEO of Bitwise Asset Management, touted cryptocurrency as a new asset class that was proving attractive to both retail and institutional investors alike. Americans are now seriously considering cryptos in their retirement plans. But not everyone is convinced.

Andreas Utermann, CEO of Allianz Global Investors, recently said investors should steer clear of the asset because “it does not generate an income stream” and as a currency is “simply too volatile to be considered as a numeraire or a store of value”. He called cryptos “unsuitable for investing in”.

All this is missing the point, says Lorien Gamaroff, CEO and co-founder of Centbee, a cryptocurrency payments and remittance company.

“Cryptocurrencies appear to have certain characteristics of assets, but to look at them this way is misguided,” he says. “Bitcoin was invented to be peer-to-peer digital cash and not a digital form of gold. As a monetary system it has a supply which increases at a predictable rate until a limit is reached.  This makes it ultimately deflationary and immune to hyper-inflation. This in and of itself is not sufficient for it to be a store of value. Nor is the ability to transact outside of traditional financial systems and beyond the purview of financial regulators.”   

To read more about cryptocurrencies as an asset class, download the March issue of RISKAFRICA magazine now!

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