Steve Kurz, Partner and Head of Asset Management, Galaxy Digital and Alan Campbell, Bloomberg’s Global Head of Product Management for Multi-Asset Indices, discuss the changing landscape and opportunities for investment in digital assets.
The Global Financial Crisis led to a whole generation of young people becoming distrusting of and disenfranchised with institutions. At the same time that this institutional distrust was developing, Bitcoin began to teach a whole generation of people about monetary policy, which sparked an even further interest in decentralization.
In addition to this generational distrust, consumer prices rose 5% year over year in May 2021, which is the fastest pace since August 2008, and has far exceeded Wall Street expectations. The 3.8% rise in the core inflation rate was the sharpest increase in nearly thirty years, and American governmental debt continues to accelerate at an unparalleled rate. T
hese sharply rising rates make cryptocurrency and digital assets increasingly attractive to investors. As the wealth transfer from Boomers to Millennials and Generation Z nears, it’s expected that the landscape of digital strategies will change wildly. Because Millennials and Gen Z are typically more comfortable with digital strategies and cryptocurrencies than Boomers, technological progress is accelerating as interest in digital assets grows.
“This lack of trust as we’re having a generational turnover has led to a situation where an entire generation is saying they want to rebuild [the financial system] themselves,” says Kurz.
Kurz identified four main ways that Galaxy Fund Management predicts digital assets will progress. First is through payments. Traditional payment systems are being disrupted through Stablecoins, which allow users to transfer dollars globally, quickly, and cheaply. Digital assets fix the issues with legacy payment systems, one of which is that a third of the world doesn’t have access to real banking or payments. “Some of the payment coins, maybe even bitcoin, are going to be able to fill the unmet need for peer-to-peer global payments, and a frictionless, strong, decentralized system,” says Kurz.
The second way Kurz identifies that digital assets will progress is through decentralized finance (DeFi), which offers open and permissionless financial activity. Third is emergent stores of value: Bitcoin is the world’s only perfectly and verifiably scarce asset, which makes it inflation-resistant and independent of a central government. Kurz identifies Web 3.0 as the last category of digital asset progress, which will allow ownership of internet-native assets.
Bloomberg Galaxy Crypto Index (BGCI) is an independent dataset that’s designed to measure the largest portion of the asset class. The IP is owned by Bloomberg and co-branded with Galaxy Digital Capital Management. BGCI’s methodology relies on data integrity, diversification, liquidity, and volatility-controlling continuity. BGCI includes 40% Bitcoin, 40% Ethereum, 8.37% Bitcoin Cash, 8.39% Litecoin, and 3.24% EOS.
“This product structure, which is a private fund, and the diversification principles, really work well together to capture some of the store of value, web 3.0, and payments use cases,” says Kurz.
Galaxy Digital is a diversified financial services and investment management firm in the digital asset, cryptocurrency, and blockchain technology sectors.
To learn more, catch the replay of Galaxy’s recent webcast: Diversifying Across Digital Assets. The presentation includes coverage on:
- Segmenting the digital asset class
- Indexing in crypto and the BGCI
- Digital assets as an investment and how to access exposure