July 2021

It’s Time To Enroll In Digital Asset Education | FA Magazine

By Michael Greenwald | 7/27/2021

The volatility in the cryptocurrency market has spiked in recent weeks with several of the biggest names plummeting. A number of factors are contributing to the market’s instability, including China’s crackdown on cryptocurrency mining, Tesla’s announcement that they will no longer accept Bitcoin and the IRS getting more stringent about collecting taxes on cryptocurrencies.

Crypto’s race to the top was expedited by increased access for individual investors to crypto exchanges, lowering the barrier to entry. Increased access, however, has led to a push for more regulation from central banks and governments who fear the potential of untraced, anonymous wealth transfers between accounts that lack beneficial ownership.

The Need For Digital Asset Education

Cryptocurrency is a transformative technology that holds the potential to revolutionize how business is conducted on a global scale. Even as cryptocurrency becomes more mainstream, investors face a minefield of volatility, cybercrime, lack of reliable educational assets and an everchanging regulatory landscape. The digital asset world is moving at lightning speed and there is a very steep learning curve for those entering the market. To minimize risk, it is essential to fully understand the shift of traditional financial structures to digital platforms and the complexities of this emerging asset class.

As a growing asset class that expanded close to 800% in the past year, cryptocurrency is a Pandora’s box that offers what looks like a “golden ticket” to get-rich-quick investors. Despite over 100 million people currently holding cryptocurrency assets, close to one third of all crypto investors have no idea what the actual product in which they are investing is, according to a Cardify survey from 2020. The survey also shows that 40% of all buyers are brand new to the scene, and close to 25% of investors purchased cryptoassets in the hope of landing short-term gains.

To understand what cryptocurrency is, how it works, and where it is going next, we can first look to how stores of value have progressed in our society.

History Of Value

Though physical stores of value have evolved throughout the history, what has not changed is the societal desire for a widely accepted medium of transaction (livestock, precious gems, paper notes, etc.). The ability to hold value in different physical assets has long given citizens a confidence in maintaining their buying power and overall wealth. The primary benefit of having a widely accepted store of value lies in the fact that it can always be retrieved and is predictably useful when it is utilized in a transaction. As the world moves into an age of digital transactions, the idea of stores of value becomes far less tangible. Value moves between accounts without the true owner ever seeing its physical form. Though that thought can be frustrating, there is no doubt that digital transactions are more efficient and faster than ever before.

If an investor wants to understand the viability of digital currencies, the next step is to consider the future of consumer preferences through the lens of past technological adaption.

Technology Uptake In 1990s
The latest truly innovative and novel invention that was adopted by the masses were the protocols used by devices connected to the Internet. Between 1990-2000, information became accessible at the click of a button. Websites exploded and e-commerce began to establish itself, enabling consumers to make a choice between buying something from their home and physically going to a store.

It took an extended length of time for people to begin adopting this technology over other, more traditional forms of communication and information gathering. Accepted protocols of the Internet have become a central part of nearly every person’s life in modern countries, and this type of meaningful global transition takes time. This is exactly what must occur with digital assets.

Digital Currency Uptake In 2020s

Though the Internet inherently made communication, access to information, and purchase or sale easier than ever before, adoption lagged, largely due to:

  1. Infrastructure—as with new technology, we need a sufficient back-end to support its use. This means people must have access to electricity and consumer products that provide ease of access.
  2. Knowledge must be widely available to the public for individuals to understand the utility of the new technology, ultimately encouraging them to adopt it for their own use.
  3. The breaking down of social norms and tradition. This requires time and critical mass.

As of January, there are now more than 4,000 cryptocurrencies available on the market. They span a variety of uses and advantages from each of their unique designs and the efficiency problems that they set out to mitigate. The innovation of digital payments systems and new currencies requires infrastructure, knowledge, the breaking of tradition and a network effect in order to truly be successful. But as more knowledge becomes available about the benefits of different currencies, and the rising tide of digital asset holders, the future looks bright.

Michael B. Greenwald is director at Tiedemann Advisors and director for digital asset education. He was the first U.S. Treasury attaché to Qatar and Kuwait, acting as the principal liaison to the banking sector in those nations, while serving in two presidential administrations and under three treasury secretaries from 2010-2017.


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