The Future of Digital Securities
Did you know that the cryptocurrency market went from being worth around $130 billion in 2019 to over $3 trillion in November 2021?
While cryptocurrencies have gone up and down over the last few years, the underlying technology has the potential to transform the entire world economy. From blockchain security systems to rare works of art, digital securities are a great way to diversify your portfolio.
Although the industry is still relatively new, this also offers you the unique opportunity to buy in at an early stage. This means that you can potentially expose your portfolio to exponential growth over the next decade by simply investing in the future.
Thinking about diversifying your investment portfolio with digital securities? Here’s everything you need to know about the future of digital securities and why you should invest in them.
What Are Digital Securities?
Known as tokenized securities or security tokens, digital securities are financial securities that can be represented on the blockchain. This means that the asset itself is completely digital, with verification being confirmed through modern distributed ledger technology.
Traditional securities refer to assets that can be held and traded with others. This includes things such as stocks and bonds. These assets are linked to physical assets, while digital securities are linked to the digital blockchain.
Digital securities work in the same way as traditional securities. This means that you can buy, hold, or sell them to others in the market. These assets can also be leveraged and can even be linked to physical assets and commodities such as gold and oil futures.
What makes the security a digital security is its reliance on blockchain technology.
What Is Blockchain Technology?
In simple terms, the blockchain is a massive ledger of transactions. While traditional banks also keep databases and records of every transaction you make with your account, the blockchain does this in a transparent and public way. The blockchain takes this transaction data and compiles it all on a public ledger.
This public ledger is not hosted in a single place but can be duplicated and hosted on multiple servers at the same time. The fact that the database is not kept in a centralized place makes it incredibly difficult to hack. This is because if someone were to get into one of the databases to edit data, the other copies would quickly notice that something is wrong and override the change.
In this way, blockchain technology makes use of a decentralized hosting system to maintain data integrity. This system enables digital securities to hold their value without the fear of theft.
The core concept behind digital securities is the power of the blockchain. This technology is based on a decentralized structure, allowing the entire system to be more secure in the process. While this system has allowed digital assets like cryptocurrency to be incredibly secure, they can have tons of other applications as well.
This is why many people agree that the underlying technology is what makes cryptocurrencies like Ethereum so valuable. The additional applications and instructions that you can attach to the asset are unrivaled by any physical asset that you could invest in. In this way, you could view investing in cryptocurrencies and other digital assets as a way to futureproof your portfolio.
Digital Assets To Invest In
While cryptocurrencies may be the most popular digital securities on the market, there are a number of different options for you to invest in. These assets can all be described as digital assets and come with the security associated with digital securities. Here are some of the most popular digital securities that you can invest in today.
Non-Fungible Tokens (NFTs)
Non-fungible tokens, also referred to as NFTs for short, are unique tokens that are held on the blockchain. These tokens are designed specifically to verify ownership of a digital asset or security. NFTs can be anything digital including drawings, art, music, or even a film as long as they are recorded on the blockchain.
Since they are attached to the blockchain, these assets can then be bought, held, and sold to other people. In this way, you can take a digital asset that you have created and essentially sell its ownership rights of it to another person. This is an incredibly powerful tool as digital assets can easily be copied and distributed through the internet.
In this way, NFTs allow you to hold and prove ownership of a digital asset. To make it simpler, an NFT is like the certificate of authenticity of any physical asset. With most things becoming digital in the modern world, NFTs are set to be incredibly valuable to those who need a way to authenticate these digital assets.
Cryptocurrency is by far the most popular kind of digital security on the market. This digital security is designed as a digital currency to be traded as a medium of exchange. Cryptocurrencies operate entirely on the blockchain, meaning that they do not need to meet regulatory demands that traditional fiat currency may have to.
This decentralized nature allows cryptocurrency to be immune from many of the economic effects that influence the value of the traditional currency. For example, if the Federal Reserve decides to print a few more trillion dollars this year, the value of the dollar will go down. Since this kind of activity can’t be taken with cryptocurrencies, the value of the tokens is much safer.
The blockchain also allows you to send cryptocurrency from one part of the world to the other in a matter of split seconds. Since there are no banks and reserves in the way to slow down the transaction, sending large sums of money is just as quick as sending a few cents.
The Crypto Community
While cryptocurrency is designed as a medium of exchange, it has become an incredibly popular investment on its own. The returns have been incredible, leading to many people buying and holding the currency itself as an investment.
To put this in context, the price of a single Bitcoin was under $4,000 in 2019. The price of Bitcoin rose after the pandemic to a high of over $60,000. This means that people who just bought a Bitcoin in 2019 would have seen an increase of 1,500% in just two years.
Cryptocurrencies and the decentralized nature of digital assets have split opinions around the world. This has led to a crypto community forming to advocate for the applications and usefulness of cryptocurrencies over traditional fiat currencies.
These groups have been successful in raising awareness around the value of cryptocurrencies, with many major financial firms taking the opportunity to diversify their holdings with a bit of crypto.
Benefits of Digital Securities
Digital securities have taken the world by storm, and for good reason. Here’s why you should consider investing in digital securities.
Simple, Efficient Transactions Buying and selling assets can be an incredibly long and complicated process. However, digital securities can be purchased effortlessly online. You can also purchase these assets anonymously if you would prefer your transaction to go unnoticed.
Incredibly Low Transaction Fees The blockchain allows you to send and receive large amounts of money in the blink of an eye. Whether you want to send a cent or a billion dollars around the world, cryptocurrency offers you an affordable and reliable way to do so.
Transparent Yet Private Blockchain technology is based on a decentralized batch of public ledgers. While this does mean that every transaction is made public, the blockchain still manages to secure your privacy at the same time. This is because the blockchain does not publish your name but just your crypto wallet details. This means that you can buy and sell as much as you want and only those who know your exact wallet details will be able to see what you’re doing with your assets.
Exponential Growth Potential While the crypto market did reach $3 trillion in 2021, the market has since crashed back down to under $1 trillion in 2022. This highlights the growth potential of digital securities in the near future. With inflation at record highs, now is the perfect time to diversify your portfolio with digital assets like crypto.
Unparalleled Security As mentioned above, digital securities come with security that other assets simply can’t compete with. This public, decentralized technology allows you to send and receive funds around the world in the blink of an eye. It also protects your assets from theft at the same time.
Hedge Against Inflation Cryptocurrencies are completely decentralized. This means that there is no central bank controlling the flow and production of these coins and tokens. In this way, you won’t be exposed to the same risk of inflation as you would with traditional currencies.
Diversification The last and most important reason to invest in digital securities is to diversify your portfolio. Cryptocurrency is one of the most effective ways to diversify your portfolio as it does not share any direct link with other assets and asset classes. This allows it to be the perfect hedge.
The Importance of Diversification
We all know the popular saying, “don’t put all of your eggs in one basket.” Simply put, this is because if something were to happen to the basket, all your eggs are at risk. This is true in the world of investing, as experts agree that you should diversify your portfolio as much as possible.
This can help protect your portfolio against market movements that may not be in your favor. This is why diversifying your investments in multiple companies is not enough. Experts agree that you should invest in different companies, different sectors of the economy, and hold assets in different asset classes as well.
Investing in different asset classes can help hedge against movements in other asset classes. This means that if something were to happen to your stock market investments, you can still have real estate and commodity investments to help make up the lost ground. In most cases, these investments are somewhat linked so that if one goes down it has an effect on the other.
However, if something were to happen to the entire economy, the perfect way to diversify is through alternative assets and digital securities. This is because digital securities have much fewer links to the traditional economy than any other asset class.
Diversification Through Digital Assets
In this way, digital assets can be viewed as the most effective way to diversify your portfolio. Some economists go as far as saying that these digital securities can be seen as insurance policies for the rest of your investment portfolio.
While diversifying into digital assets can help reduce your portfolio’s risk, the best way to go about this is through a crypto hedge fund. This is because you won’t be relying on a single cryptocurrency or digital asset but rather a diverse slice of the entire market.
Crypto hedge funds expose you to the major upsides of investing in digital assets but also help you mitigate the risk that you’re taking on. This makes it perfect for both individual and group investment portfolios.
Invest in a Crypto Hedge Fund
Financial markets can be an incredibly volatile environment. This is why diversification is key to building a robust and progressive portfolio. With this in mind, it’s important to consider investing in cryptocurrencies and other digital securities to help future-proof your entire portfolio.
If you have any questions or want to learn more about how to get started, contact us today. Our team would love to get in touch to help you diversify your portfolio with digital securities through a holistic crypto hedge fund.
Last updated June 1, 2022
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