What are digital assets? Investing Explained

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INVESTMENT EXPLAINED: What you need to know about digital assets, which are not tangible, but are nevertheless considered to have value

In this series, we break down the jargon and explain a popular investing term or topic. Here, they are digital assets.

What are they?

These are assets that are not tangible, but are nevertheless considered to have value.

The two best-known categories are cryptocurrencies, such as bitcoin and ether, and NFTs (non-fungible tokens).

It can be any digital creation such as a piece of music or a work of art.

Changed days: Bitcoin is the most well-known “crypto”, so widely traded that at the height of the market, this activity consumed as much electricity as Argentina in a year

Billions have been spent on some artistic NFTs, some through Sotheby’s and other auction houses. They are non-fungible as they are unique and cannot be replaced.

Bitcoin is the most well-known “crypto”, traded so much that at the height of the market, this activity consumed as much electricity as Argentina in a year.

Blockchain is the “distributed ledger” technology that underpins NFTs and cryptocurrencies. instead of information about the sale or purchase of a digital asset being held in a single database, it is distributed across a network of computers called nodes in a secure and decentralized manner.

Haven’t the prices gone down?

Yes, much to the chagrin of those who gambled with their savings. In mid-summer, NFT sales fell off a cliff. This has not diminished the attention paid to the potential of digital currencies and blockchain technologies among central banks, financial institutions and governments.

For example, the US Federal Reserve is considering introducing its own digital currency. These are different from cryptos such as bitcoin, which do not have the backing of a central bank.

Crypto prices, which peaked in November last year, have been hit by a number of factors, including the war in Ukraine, rising interest rates and a series of industry scandals, such as than the high-profile bankruptcies of US crypto lenders Babel Finance and Celsius Network.

The price of bitcoin may have fallen 44% since January, but lately this crypto has recouped some of its losses. Ether is also bouncing back to some degree.

Bored Ape NFTs – images of bored-looking cartoon monkeys – were celebrity favorites, selling for millions in the fall of 2021. But prices for these works have plummeted in line with crypto’s descent .

Why the interest in blockchain?

The system offers a way to make cheap, safe and fast money transfers.

A number of banks, including Santander, are already using the blockchain-based payment network Ripple. Ripple’s mission is to “build breakthrough crypto solutions for a world without economic borders”.

Fund management groups believe that blockchain technologies will underpin how funds and stocks will be traded in the future. This month, Abrn became the largest shareholder of Archax, a digital exchange, brokerage and securities depository regulated by the Financial Conduct Authority.

Stephen Bird, the boss of Abrn, said that blockchain technologies “will inevitably be a big part of the future of financial markets”. The renewed interest in digital assets is also reflected in the decision of BlackRock, the American manager, to offer a bitcoin fund to its institutional clients.

Is it time to buy cryptos?

These currencies are reserved for those who can afford to lose their entire stake and who have a taste for speculation.

However, you would want the people managing your money to support the most lucrative blockchain projects.

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