Commentary: Cryptocurrencies Could Become a Viable Asset Class for Investors
INVESTORS NEED MORE SECURITY TO INVEST IN CRYPTO WITH CONFIDENCE
As it stands, large institutional investors are turning away from the sector or going into it in âventure capital modeâ, investing at the individual firm level. If they are to start viewing cryptocurrencies as an alternative asset class – like fiat currencies, commodities, or derivatives – three conditions must be met.
First, there must be clean and reliable data. Here, the cryptocurrency market has made significant progress. While financial information remains imperfect and incomplete, many data providers are now going beyond pricing data, at least for larger cryptocurrencies.
The key players in the traditional finance sector – such as the S&P Dow Jones, with its Digital Market Indices portfolio – constitute an important methodological reference for constructing this data and ensuring their credibility.
Second, we need research that facilitates a deeper understanding of cryptocurrencies as an asset class.
Academic research has supported the creation of several new asset classes, such as derivatives and index funds, not to mention investment approaches like factor investing. Now, significant progress is being made on cryptocurrencies.