CRYPTOCURRENCIES AS INVESTMENT ASSET

Abstract

As the title introduces, the thesis is going to explain the foundation of the new and unknown world of the cryptocurrencies. It is drawing the attention of a lot of people distributed all around the globe: there is no distinction in the geographic area, in the culture and in the religion. Cryptocurrencies are operating online and as such, anyone with an internet connection can reach, hold and use them anywhere. The thesis has been developed to be helpful to those people who want to get started with this new branch of the financial world. It is a guide for the beginners who want to learn where they were born, the idea behind this incredible disruptive technology and how it works. The document starts telling the history of the monetary system, highlighting the points of strengths and mostly the weaknesses since they are crypto’s origin point. In the first chapter, it will be also explained the vision about the future of this new financial scenario. Then, people will read about the technology on which digital assets are based: the blockchain. They will have the opportunity to discover the hidden side of this world, the working system and all the people involved in the functioning. They will learn the reason why many millionaires and politicians are concerned about the sustainability of the cryptocurrencies. The reader is going to understand why such an enormous processing power is required and what could be the possible solutions to the problem. In the third chapter, the reader will bump into two of the most important questions that people willing to invest in crypto are asking themselves. Is there any regulation to protect the investor? What about the tax rate over the capital gain? The answer may change according to the different uses and application that cryptocurrencies can have. At this point, the reader will have clearer ideas about the crypto world. However, it is necessary to understand if he or she could be a good investor according to his or her investor profile. There will be an explanation of what investing in digital assets means. People are investing fiat money they earn working hard, therefore, they must understand the riskiness of this sector and comprehend if they are brave enough to undertake the risk. In the last chapter, people will discover how to introduce cryptocurrencies in their portfolios using the “risk parity” method. People will read about the study of a hypothetical portfolio investing in equity, government bond, corporate bond, commodities and cryptocurrencies according to a risk allocating method. Now, people will have enough information to understand if they have the characteristics of an intelligent investor and if they own the psychological predisposition to enter the crypto world.