An Introductory Guide to Cryptocurrency Assets

Jump to page contents

An Introductory Guide to Cryptocurrency Assets

Stock markets have been in existence since the 1600s. They are well-regulated, have institutional investors comprising much of the capital, and have a huge amount of analysts that agree over how to value the stocks that make up the market. Cryptocurrencies starkly contrast this.

Bitcoin is barely ten years and the market is made up almost entirely of retail investors, and there is little to no agreement over how to value cryptocurrencies.

It was only very recently that cryptocurrencies even began to gain recognition as an asset class at all. With so much uncertainty regarding this market, we dedicated a guide to understanding what cryptocurrencies assets really are. This guide will serve as an introduction to assets, explaining what an asset class is and presents some potential scenarios going forward.

What is an Asset Class?

A popular research paper by Robert Greer – vice president of Daiwa Securities, in 1997 proposed three main asset classes:

  • Capital Assets – can produce capital to the owner either through price appreciation or dividends.
  • Consumable/Transformable Assets – can be consumed directly or transformed into something which is consumable.
  • Store of Value Assets – derive their value from their ability to store wealth.

These main asset classes can be split into subcategory classes, which can be further split into sub-classes. For instance, equities would be considered a class which is classified as the capital asset class. Equities can further be split into sub-classes such as large-cap equities, mid-cap equities, or low-cap equities.

Assets can often play roles in more than one asset class. For example, gold can be considered as a consumable/transformable asset, as well as a store of value asset. It can be directly used or transformed for aesthetic purposes such as jewellery, but has also historically played an important role as a store of value.

Cryptocurrencies and their Asset Class

Bitcoin is mainly considered a consumable as well as a store of value asset. It can be used as a payment for goods and services but many also use it as a store of value. Different cryptocurrencies are set up to serve different functions and will, therefore, have different classifications as an asset class.

Cryptocurrency assets such as NEO have some of the properties of capital assets. Holding NEO results in dividend payments in Gas. Due to the decentralized nature of cryptocurrencies, many of their roles are still being debated. Time will tell which cryptocurrencies are going to serve in which asset classes.

Cryptocurrencies’ Reputation

Cryptocurrencies are widely considered a high-risk asset class and it has largely earned its reputation as one. The markets remain unregulated, volatile, and highly illiquid. There are thousands of altcoins which make up the market and many exchanges which facilitate trading often at different prices. A market such as this provides great risk but also a great opportunity.

5/5
5/5

In our next guide, we will look into aspects like return and potential future return; volatility and liquidity; regulation, correlation and security, amongst other factors worth taking into consideration.

Ready to join our tribe?

We respect your email privacy

Subscribe now to recieve exclusive updates and offers!

Recently Similar Guides

Latest Guides

Crypto Mining,Cryptocurrency,Investment

Why Investing in Dogecoin Now is Lucrative?

2021 has greatly been touted as the year of meme investments. Memes took over the financial trading industry towards the first quarter of the year – from the stock market to bonds trading. The crypto market wasn’t left behind either – Dogecoin emerged as the winner of this trend. But contrary to what has been […]

5 May, 2021
Bitcoin,Crypto Wallets,Exchange Platforms,Investment

Should I Sell My Bitcoin?

HODLing Bitcoin isn’t for the faint-hearted. Period. One minute the prices are in the red zone, the next the price skyrockets shattering known resistance zones and setting new all-time highs. If you are among the few lucky people who boarded the Bitcoin bus early, there’s a question that’s always lurking on your mind – should […]

25 April, 2021
Altcoins,Cryptocurrency,Liquidation

Top 3 Most Volatile Cryptocurrencies

According to a publication by CNBC, the total crypto market value crossed the $2 trillion mark in April 2021. The major milestone marked the entry of the asset class as a worthy contender in the global financial market scene. However, despite the impressive history and growth of cryptocurrencies, the issue of volatility still bugs this […]

24 April, 2021
Cryptocurrency,Exchange Platforms,Stablecoin

How Many Cryptocurrencies Are There?

Bitcoin, the first decentralized cryptocurrency, was launched in 2009. It took several years before the world heard about it. However, it didn’t take long after that for the world to recognize its value – and for its value to soar to prices higher than $20,000. Bitcoin demonstrated the potential of cryptocurrencies. It also inspired the […]

22 April, 2021
Bitcoin,Exchange Platforms,Investment

How To Cash Out Large Amounts Of Bitcoin

Bitcoin is a form of digital currency launched in 2009, which earned it the status of the first cryptocurrency to ever exist. It is a decentralized digital currency that does away with middlemen such as banks and government agencies during any financial transaction, but it requires a certain level of knowledge on how to cash […]

20 April, 2021
Altcoins,Cryptocurrency,Investment

How to Buy Penny Cryptos In 2021?

Cryptocurrencies are increasingly becoming the main headline in news broadcasts and the central topic of finance and technology discussion forums. The price of the leading coins, Bitcoin and Ethereum, has led to the crypto market cap topping $2 trillion, and this has only increased interest amongst investors. Whilst major coins continue to take much of […]

19 April, 2021
Banking,Bitcoin,Cryptocurrency

How to Buy Bitcoin with Bank Account

The mainstream explosion of cryptocurrencies has led to an increase in the number of ways you can buy cryptos. It wasn’t long ago when Bitcoin was considered a risky fringe asset, with banks and most financial service providers refusing to handle any transactions related to Bitcoin. There are some countries where you cannot buy Bitcoin […]

10 April, 2021
Cryptocurrency,Exchange Platforms,Investment

Coinbase vs Coinbase Pro: Which one to choose?

With cryptocurrencies making waves globally, many people now look for ways to convert their fiat currencies into popular cryptos like Bitcoin, XRP, Ethereum, etc., on different crypto exchanges. Today, more than 300 crypto exchanges are available, and it can be daunting to know which to choose. One of the most popular exchanges with over a […]

9 April, 2021