The unsavoury conditions surrounding bank deposits and rising distrust in the traditional finance sector has resulted in a boom for liquid alternatives. The real rate on short deposits is lower than inflation, the yield on bonds has not increased, and in the stock markets the price-profit ratio scares investors.
The Appealing Essence Of Liquid Alternatives
However, society is not yet ready for mainstream adoption of such solutions though, as people are frightened to invest in these alternatives due to high transactional costs. However, the liquid essence of these products is extremely appealing because of negative real interest rates. The CBS has succeeded in pushing capital outside of traditional savings products like deposits and fiat into liquid alternatives.
Recently, Bruce Greenwald carried out a virtual Fireside Chat with Li Lu, the founder and chairman of Himalaya Capital. Greenwald and Lu covered multiple topics during the discussion, addressing everything from the value investor's approach to appraising businesses and what he had learned from his great friend Charlie Munger. The duo also discussed China's economy Read More
In general, the market for alternative investments is in a very “hot” state, and digital assets are finally starting to take their rightful place in the capital allocation matrix. At the moment, the bubble is not specifically in cryptocurrencies, but in alternative investments, because prices have risen not only for cryptocurrencies, but also for luxury real estate, paintings, as well as rare cars.
However, as soon as the real rate becomes more than zero, an outflow from the sector of alternative investments can be expected. Until then, money will continue to flow into digital assets and other liquid and illiquid investments.
Article By Gregory Klumov, CEO of STASIS