Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
2022 to see crypto in the mainstream
It’s been an extraordinary year for cryptocurrency. From Bitcoin hitting US$1 trillion ($1.4 trillion) in market value to Elon Musk’s Dogecoin tweets, it’s been a record year for the digital asset class, which, according to CoinGecko, surpassed US$3.3 trillion ($4.6 trillion) in total value as of last Monday.
It does set up some big expectations for 2022 and the years ahead. With the big banks and corporates now on board, engagement with cryptocurrencies is beginning to deepen and new technologies are beginning to emerge. Financial regulators are taking the emergence of blockchain-based decentralised finance (DeFi) seriously, and non-fungible token (NFT) applications are expanding rapidly.
Kanish Chugh, head of distribution at ETF issuer ETF Securities, has released a short note on the crypto thematic. He says, “On the same day in February that Tesla announced it had invested US$1.5 billion in Bitcoin, the Federal Reserve of St Louis published a paper on DeFi that pointed to the potential benefits of financial infrastructure built on the Ethereum blockchain.”
Chugh marks this as the beginning of the true acceptance of cryptocurrencies. It allowed financial advisers such as Morgan Stanley to offer Bitcoin to its wealth management clients. Following this, the European Investment Bank raised €100 million with an issue of two-year bond tokens (or digital notes) on Ethereum.
“Another milestone was the listing of cryptocurrency exchange operator Coinbase on the Nasdaq Exchange. The company had a US$100 billion market capitalisation at listing, underlining the value that the broader investment community now sees in the crypto market and its leading participants.
One of the more surprising developments, says Chugh, was the decision of the government of El Salvador in September to accept Bitcoin as legal tender.
Owing to the fast-paced nature of cryptocurrency, ETF Securities has partnered with crypto specialist investment manager 21Shares to develop cryptocurrency investment opportunities.
Despite a few share corrections and Beijing’s crackdown on Bitcoin, 21Shares is confident on cryptocurrency’s outlook. The firm says, “overall, the year’s positive developments outweighed the uncertainty and volatility, pointing to strong expectation for the current year and beyond. 21Shares are optimistic about the future of this space because of the pace of innovation and the financial support entrepreneurs are receiving from venture capital (VC) firms and from a crowd-sourced network of talents and resources. A good indication of this new era is the amount of VC investment in the industry, which increased 300% last year.”
The specialist crypto investment manager is tipping DeFi (decentralised finance) applications, i.e. blockchain-based financial infrastructure built on smart contract platforms, will begin to replace traditional financial services, bypassing centralised institutions.
21Shares is so confident on this exciting industry that it says “new marketplaces are emerging in this sector, including Fractional, which allows owners of NFTs to sell a fraction of their artwork at an affordable price. 21 Shares also expects to see greater interoperability across blockchains in the year ahead, improving user experience and unlocking a range of new services.”
