How to benefit from investing in Blockchain, the unexplored ways
Investing in blockchain technology can offer incredible upside potential as the global blockchain market is expected to grow from $7.4 billion in 2022 to $94.0 billion by the end of 2030. How to benefit from investing in blockchain? We share our insights.
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Blockchain technology offers incredible growth potential
The global?blockchain technology market size?was valued at?USD 17.46 billion in 2023?and is expected to grow at a compound annual growth rate (CAGR) of?87.7% from 2023 to 2030. The escalating demand for secure and transparent transactions across various industries is driving this remarkable growth.
Secure and transparent transactions are of particular interest to such industries like finance, healthcare, and supply chain management. Traditional international payment systems often involve multiple intermediaries, resulting in delays and high costs. In contrast, blockchain-based solutions offer faster, cost-effective, and transparent cross-border transactions, driving their adoption in the finance and remittance sectors.
Since blockchain serves as the underlying technology for most cryptocurrencies, the rising popularity of digital currencies like Bitcoin and Ethereum has inevitably directed considerable attention to the technology itself. Organizations are exploring how blockchain can be used to create and manage digital assets, including Central Bank Digital Currencies (CBDCs).
Getting investment exposure into blockchain technology
Investing in blockchain technology can be approached in several ways, and the best method for you will depend on your investment goals, risk tolerance, and interest in the technology. We highlight some common ways to gain investment exposure to blockchain:
Directly Purchase Cryptocurrencies: Cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) are built on blockchain technology. Investors can buy these digital currencies on cryptocurrency exchanges.
Invest in Blockchain-Related Stocks: Consider investing in publicly traded companies that utilize blockchain technology.?
Exchange-Traded Funds (ETFs): ETFs allow you to invest in a diversified portfolio of blockchain-related stocks.?Two notable examples are the Amplify Transformational Data Sharing ETF (BLOK) and the Reality Shares Nasdaq NextGen Economy ETF (BLCN).
Crowdfund New Cryptocurrencies: Some blockchain projects raise funds through initial coin offerings (ICOs) or token sales. Participating in these crowdfunding events can give investors exposure to new blockchain projects.
Purchase NFTs (Non-Fungible Tokens): NFTs are unique digital assets stored on blockchains. They represent ownership of digital art, collectibles, and other digital content.?If you believe in the NFT market, consider investing in NFTs.
Blockchain Bonds or Loans: Some platforms use blockchain for issuing bonds or facilitating peer-to-peer loans. This can be a way to earn interest on your investment through blockchain technology.
Investing in Blockchain Bonds
Blockchain bonds represent an exciting intersection of traditional finance and cutting-edge technology. There are a number of Blockchain Bonds which are available for large institutional investors and funds. Those bonds include for example, EIB (European Investment Bank) Digital Bond, World Bank Bond-i; Santander End-to-End Blockchain Bond. However, we would like to consider blockchain bonds which could be affordable for a regular retail investor like you. Below we highlight some of Blockchain Bonds which could be attractive for retail investors:
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Tokenized Bonds:
A tokenized bond is a type of investment that represents a bond using a blockchain token. Essentially, it’s a digital version of a traditional bond, leveraging blockchain technology to manage and record the ownership and transfer of the bond. Tokenization can provide several benefits over traditional bonds, such as increased liquidity, faster settlement times, and reduced costs for issuance and transfer.
Tokenized bonds work by creating digital tokens that represent either a fraction or the entirety of a bond’s value. These tokens are stored on a blockchain, which records transactions and ownership securely and transparently. Investors can buy and sell the tokens similarly to how they would trade traditional bonds or equities, but with the added benefits provided by the blockchain.
Here’s how you might buy a tokenized bond:
Choose a reputable platform: Look for reputable platforms or projects that offer tokenized bonds. It’s important to research the issuing company or entity, the terms of the bond, and the blockchain platform used for the tokenization. For example, we highlight LCX.com platform. This platform offers European tokenized bonds with 7% fixed-yields per year. Although the investment period in this EURt 7% bond is closed, you may want to register and join the waiting list. LCX will announce the next investment period.
Set Up a Digital Wallet: To hold tokens, you’ll need a digital wallet that supports the blockchain platform on which the tokenized bond is issued. Ensure your wallet is secure and that you keep your private keys private.
Register on a Platform: You will likely need to register on the platform where the tokenized bonds are being offered. This may include undergoing a Know Your Customer (KYC) process to comply with regulatory requirements.
Purchase the Tokenized Bond: Once registered, you can purchase tokenized bonds directly through the platform using fiat currency or cryptocurrencies, depending on the platform’s requirements.
Trading and Management: After purchasing, your tokenized bonds will be held in your digital wallet. You can manage your investment through the platform, and if you decide to sell, you can trade your tokens on the secondary market if available.
Digital bonds are gaining traction in the financial markets, and while the landscape is still evolving, there are some interesting developments. Over the past year, digital bond issuance has increased significantly.?Approximately $1.5 billion worth of digital bonds were issued in 2023, compared to almost nothing the year before. Sovereign and corporate issuers have entered the nascent digital bond market with small issuances, primarily for testing purposes. Traditional finance intermediaries (such as exchanges and banks) have facilitated these issuances, although their roles are evolving.
Examples of Digital Bond Initiatives:
Summary – Our view
Both?tokenized bonds?and?investing in cryptocurrencies and blockchain equities?have their own characteristics and potential for profitability. Cryptocurrencies and blockchain equities offer higher potential returns but come with higher risk. Timing and research are crucial. A balanced portfolio may include both bonds and crypto-related assets.
Tokenized bonds are traditional bonds (debt securities) that are issued on a blockchain platform. Each bond is represented by a digital token and each bond pays a secure and regular interest (which could be suitable for a passive investor or could represent some risk diversification). So, far, from our research we learned that digital (tokenized) or smart bonds are in high demand. For each new digital bond issue there was oversubscription. Tokenized bonds are new evolving asset class which could be also attractive for companies and investors.
You can share your view with me in your comments.