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.
A popular research paper by Robert Greer – vice president of Daiwa Securities, in 1997 proposed three main asset classes:
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.
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.
Cryptocurrencies 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 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.
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.
CoinTelegraph is the leading provider of news within the world of cryptocurrency. It differs from the standard cryptocurrency news outlet in that it is more than a team of writers reporting on the news. Indeed, it has developed a franchise business, and is expanding its news, content, and tools worldwide. CoinTelegraphs’ services are currently available […]
The Most Popular Cryptocurrency Price Checker CoinMarketCap is one of the most popular price data resources used by traders, businesses, and enthusiasts in the cryptocurrency markets. It is commonly used as a reference by analysts within the cryptocurrency industry. The website is available in fifteen languages and CoinMarketCap also provides a mobile application available on […]
As discussed in our previous guide, cryptocurrencies are considered a high-risk asset class, and has a reputation that reflects this. The following guide will explore a number of features, including aspects such as volatility, liquidity and security – aspects that need to be considered and kept in mind, especially if investing within the world of […]
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 […]
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The cryptocurrency market is still developing, it remains unregulated and consequently, this has attracted questionable practices. There has been evidence of all kinds of activity which would be considered highly unethical and in certain cases, illegal in comparison to traditional markets. There has been evidence of exchanges pumping up their volume through wash trading, market […]
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When getting started in investment, diversification is one of the most common approaches advised to manage your portfolio. Diversification is essentially the process of determining percentages to allocate to different assets and rebalancing regularly to manage the risk. Many view it as the holy grail of investing. Others see it as simply selling winners to […]