The Rise of Digital Assets
Despite the struggling economy, the crypto market looks strong
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Hello, dear readers!
Today we’re going to look at the growing popularity of digital assets. In the past, everyone was focused on bitcoin and how its value would change over time. Nowadays, however, we have many more markets to learn about and invest in. From NFTs to DAOs to various types of software, blockchain technology has revolutionized financial markets and the internet. Read on to learn more about digital assets and their future outlook.
Growth of Digital Assets
In recent years, cryptocurrency prices have continued to fluctuate. Additionally, since last year, governments have begun introducing regulations on cryptocurrency transactions in earnest. However, despite fluctuations and regulations, interest in cryptocurrency has continued to rise. Investors are not only interested in cryptocurrency, though, interest in non-fungible tokens (NFT), securities tokens (link value to other securities in the financial investment market using blockchain technology), DeFi, and DAOs (Decentralized Autonomous Organizations) has also grown. This is because investors expect a new digital asset economy to emerge.
Large IT and financial companies are also jumping into cryptocurrency-related businesses one after another. In response, the government and central banks have also put more effort into understanding and accepting cryptocurrency. They are looking at what the next steps should be to continue to develop cryptocurrency businesses.
Even though cryptocurrency prices can drop suddenly, cryptocurrency-related companies have continued to grow. This is because blockchain technology is bigger than just cryptocurrency. Various technologies and services such as cryptocurrency-based financial services, software (i.e. middleware that connects networks based on blockchain technology), NFTs, and DAOs are constantly developing.
According to “Crypto Theses for 2022,” published by digital asset research company Messari late last year, digital assets have different value drivers in different fields. Experts predict that cryptocurrency and other digital assets will be decoupled soon. They also expect that blockchain-related industries will continue to grow due to the transition to “Web 3.0,” a new Internet, based on blockchain technology. Ultimately, even if bitcoin prices fall, cryptocurrency-based financial products and NFT markets will most likely continue to grow.
Cryptocurrency was once considered an “alternative currency” (a substitute for traditional tender) or “digital gold” (providing a store of value uncorrelated with other financial markets) until only a few years ago. However, now the prevailing view is that it is a kind of financial asset (a liquid asset whose value comes from a contractual claim). The correlation between the fluctuation of the U.S. S&P 500 stock market index and the Bitcoin price index was only 0.06 between 2015 and 2019. However, between 2020 and 2021, it increased to 0.237! Correlation is a measure of how much two variables are related. A score of 0 means that they are not related at all, but the closer they get to 1, the more related they are. It’s a positive sign to see the Bitcoin price index’s and S&P 500 stock market index’s scores move closer to 1.
