Has the world of money changed and will continue to do so?
Cryptocurrencies are now irrefutably part of mainstream finance. They are capturing our focus more than ever before during a time when financial technology is taking centre stage.
Major digital currencies such as Bitcoin, Ethereum, XRP, Lite and Dash are being thrust into the world of mainstream finance at lightning speed.
Only last month, the Financial Stability Board (FSB), the international watchdog, published a report that concluded Bitcoin and other cryptocurrencies currently pose no risk to the global financial system. This goes directly against the view of many crypto-cynics and digital currency-hating traditionalists.
In addition, earlier this year the governor of the Bank of England Mark Carney wrote a letter to the G20 finance ministers and central bank governors affirming that Bitcoin does not pose a ‘systemic risk’ to the global financial system.
This latest report therefore acts as further endorsement of cryptocurrencies from the FSB – which has members from each of the G20 major economies – and follows in the footsteps of an increasing number of global financial institutions, corporations and household name investors working with digital currencies and blockchain, and as international regulations are further enhanced. Money transfer offices in the region are looking into adopting digital currencies, bank are considering their options and crypto exchanges have been established in the UAE, with the business and finance community in the region vying to be at the forefront of this crypto revolution.
Moreover, in May this year, deVere carried out a global survey in which it was revealed that 35 per cent of wealthy investors will have exposure to digital currencies by the end of 2018.
This again underscores how HNWIs will be progressively more unable to avoid the massive potential of cryptocurrencies.
As such, there are a few key factors to be taken into account when investing in cryptocurrency.
First, consider the purpose of the digital currency, the length of time it has been in the market, market capitalisation and underlying tech solutions.
Second, decide on a short, medium or long-term investment. Depending on the selection, a comprehension of market trends, culture driving the markets and investors’ mentality should all be contemplated.
Third, determine if the digital currency is trustworthy. As stated by billionaire philanthropist and entrepreneur Peter Thiel, three key points that should be looked at in regard to new technology; a unique idea, incremental improvement, and the ability to coordinate complex ideas. These three points are the best signs a long-term investor can study in relation to digital currencies.
Fourth, only invest what you are willing to lose. This is crucial. Maintaining a well-diversified portfolio across different assets classes geographical regions and sectors helps investors to make the most of opportunities and mitigate potential risks. As a guide, I invest some five per cent of my portfolio in cryptocurrencies as I am aware, as are a growing number of investors, that they are the future of money.
Indeed, in the same way e-commerce is now considered the norm, there was a time when it was viewed with suspicion and cynicism by many, but it is now common practice across the globe and universally accepted.
The same will happen with digital currencies.
The world of money has changed and will continue to do so. Regardless of the opinions of some old school traditionalists, digital currencies are the future.
The writer is the founder and CEO of deVere Group. Views expressed are his own and do not reflect the newspaper’s policy.