How a Global Pandemic Is Stabilizing a Notoriously Risky Asset Class

Published on

Digital Assets Are Thriving Despite the Pandemic and Despite Formal Regulations 

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q2 2020 hedge fund letters, conferences and more

Digital Assets Are Positioned To Thrive In Crisis

On March 12, 2020 – or “Black Thursday” – we watched as global stock markets crashed, experiencing the largest single-day percentage drop in more than 30 years. Starting back in mid-February, the wide-spread panic and uncertainty due to the COVID-19 pandemic sparked investors to pull their assets and forced the markets into a volatile state. At the same time though, digital assets (cryptocurrencies) were – and are – uniquely positioned to thrive in crisis, and the asset class’s volatility continues to decrease as adoption increases.

The unexpected challenges of COVID-19 have only further proven the value of investing in digital assets like Bitcoin with their strong market performance. Currently, Bitcoin is facing a premium price surge and now sits over $11,000 (up 24% in July), with market conditions mirroring the previous bull run of 2017.

Cryptocurrencies are an entirely new class of assets that continues to excite the investment community, and for good reason. As global markets and economies push to recover from the ongoing COVID-19 pandemic, investors are strategizing how to recoup their losses and secure their financial futures. This begs the question: Should investors be looking to diversify their portfolios with digital assets? The answer is YES.

At this point it is becoming fiscally irresponsible to not have exposure to the digital asset class given it’s a class over the hundred-billion-dollar market cap. Digital assets are set to become one of the world’s next leading forms of currency due to their steadily increasing adoption and long-term benefits. Businesses and financial institutions that recognize the value of digital assets are going cashless to provide more secure offerings to their customers. Visa is a perfect example of this, having filed a patent in May 2020 for a crypto debit card that will first be offered in Europe and the UK. Not to mention global transactions increasingly use digital assets because of their accessibility, security and lower fees.

While the increasing global adoption of cryptocurrencies serves as a prime investment opportunity, the undefined state of cryptocurrencies has led to unsustainable regulation policies – until now.

The Twitter Hack And The Bitcoin Scam

This year, the U.S. government began making strides towards regulating Bitcoin. These efforts included proposing leveraging new technologies to better track cryptocurrency transactions to curtail financial crimes like money laundering and cyber-attacks such as the recent hack of celebrity Twitter accounts that masked itself as a Bitcoin scam. The SEC is also continuing to crack down on fraudulent digital asset activity through its investigation of digital asset investment fund High Street Capital which stole millions from investors.

One thing traditional and non-traditional investors can be sure to prepare for is the increased scrutiny by the federal government of transactions using digital assets by the end of this year. Industry professionals can also expect to see anti-money laundering regulations applied to the handling of digital assets and modifications to the Bank Secrecy Act to reflect the increased reliance on digital assets for global transactions by 2022.

Until official uniformed regulations are put into place for the cryptocurrency markets, there is an increased vulnerability for investors unfamiliar with the digital asset class. This is why digital asset investment firms, and traditional firms with digital asset offerings, now more than ever need to be holding themselves accountable for what, when and how they communicate with their clients. Cultivating personalized, one-on-one investor relationships through transparent communications and presenting forward-thinking strategies is vital to instilling confidence and trust, particularly with new investors in the space.

Managing Through The Time Of Uncertainty

In a time of uncertainty this may seem like the simplest task in the world – managing client expectations and making yourself readily available to address investor’s concerns should just come naturally. The reality is that kind of personalized customer service is often the first thing to fall through the cracks, but it shouldn’t be.

As a fund manager or partner, your strategy and mindset shouldn’t solely be about whether you have the ability to efficiently manage digital asset investments, it should also be about meeting the increased communication and educational needs of clients as well. This means continuously educating yourself on emerging and innovative financial trends beyond your traditional scope as we all adapting to the “new normal.”

Whether you are a long-time follower or avid investor of digital assets, cryptocurrencies have validated their permanence and demonstrated guaranteed performance even before the pandemic. You do not need to be a cryptocurrency expert to see the potential digital assets have for improving how we manage our transactions, plan for our financial futures and to understand the importance of continuous adoption.

About The Author

Sean Keefe - Founder & Managing Partner, Straight Up Capital

Sean Keefe is the Founder and Managing Partner of digital asset management company, Straight Up Capital. Mr. Keefe holds a law degree from the University of Colorado and brings a unique industry perspective stemming from his experience in the technology and venture capital communities of Boulder, CO.

In addition to serving as the Executive Chair of the transactional Division of Colorado Law School, he was also involved in the Interdisciplinary Telecom Program, teaching graduate level engineering classes in Telecom Business & Strategy, and Telecom Policy & Regulation. Currently, Mr. Keefe serves as a founding Board of Director for the Diversity in Blockchain Philadelphia Chapter.