Are Cryptocurrencies Different Asset Classes With Other Characteristics

In this article, cryptocurrencies are examined as investment instruments. we aim to verify whether they can be classified as an asset class and what kind of advantages they may bring to the investor’s portfolio.

Traditional currency, as it is administered by Central Banks, should fulfil three functions to be considered as such: unit of account, store of value and medium of exchange. To conclude, high-cap cryptocurrencies generally demonstrate the ability to meet all the aforementioned requirements, while the remaining ones struggle to meet even one.

They are typically traded in the same financial markets and subject to the same rules and regulations. Bitcoin has its roots in anarchist and libertarian philosophies.

Its programmers aspired to formulate a payment system that safeguarded individual rights, cut out intermediaries and was sustained by its community of users. Bitcoin’s distributed ledger technology (DLT) achieved these goals. It worked so well in fact that Bitcoin’s most enthusiastic users were those who wanted to move funds anonymously – drug addicts, money launderers, and citizens of countries with exchange controls.

Nevertheless, it is sufficient to conclude that at least cash-settled crypto-derivatives constitute financial instruments in light of MiFID II. Indeed, this is consistent with the Financial Conduct Authority’s perspective.

Thus, bitcoin is just a gambling product, not even an asset. You may buy bitcoin for a quick buck, only if luck is in your favour. In bitcoin, there is the risk of a lack of uniform regulations, which raises questions over its longevity, liquidity, and universality. There are also documented cases of bitcoin price manipulation, which is another common form of fraud.

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How To Short Bitcoin  – live4trading.co.uk 2020

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