Monthly Newsletter July 2023
Natalia Ivanova, IAR?
Founder and CEO, Financial Planning Specialist at NewGen Wealth Creation | Former Financial Advisor at Morgan Stanley
Each month, I'll provide you with the latest news, tax tips, and resources to help you stay on top of your finances. This month, we'll focus on cryptocurrency and blockchain technology.
KEY POINTS
The Mysteries of Blockchain
Blockchain has been a buzzword in the tech world for the past decade, yet many still struggle to grasp its concept. However, understanding the basic idea behind blockchain is crucial, as it holds significant potential to revolutionize various industries and benefit individuals directly and indirectly. In this newsletter, we will explore how blockchain solves problems inherent in traditional systems and unlocks new possibilities.
Solving the Problem: Let's start by examining the problem that blockchain addresses. Imagine you're traveling overseas, and a few weeks into your trip, you run out of money. You call your financial advisor and explain the situation, asking to sell some stocks and in the meantime move existing cash from your investment accounts to your checking account. Your advisor promptly initiates a transfer to your bank account. Both you and your advisor trust the bank to handle this transaction, and you're at the mercy of their processing times and approval procedures. There's no physical movement of cash involved and unfortunately, this process can be time-consuming. In contrast, blockchain offers a solution that allows for near-instantaneous transactions, eliminating the need for intermediaries and reducing processing times.
Understanding Blockchain Technology: In simple terms, blockchain is a secure and fast information sharing technology. It acts as a digital database, storing data and recording transactions in a distributed ledger. Unlike traditional systems, blockchain does not rely on a single entity for control. Instead, the power to update and maintain the ledger is shared among participants in a network. This distributed ledger technology ensures transparency and creates a high level of trust and security in the system. Once data or a transaction is recorded on the blockchain, it becomes virtually impossible to alter or manipulate.
Diverse Applications of Blockchain: Beyond its applications in financial transactions, blockchain has the potential to transform various industries. It can facilitate the exchange of anything of value, such as art, music, digital products, and property ownership. Imagine you've found your dream house and submitted your application, which gets accepted. You hire an expensive lawyer to ensure that the home ownership transfer is done correctly because you definitely don't want to pay and end up without a home. You also have to pay an additional fee for a title research, just to make sure the property doesn't have any debts and that the previous owner is indeed the rightful owner. On top of that, you need to get title research insurance to protect yourself in case your expensive lawyer makes a mistake and you suddenly lose ownership of the property. However, with blockchain, the entire process becomes transparent, secure, and efficient. All property ownership records would be securely stored and easily accessible, eliminating the need for costly intermediaries and excessive paperwork.
Realizing the Potential: Blockchain's potential impact goes beyond simplifying processes. It eliminates the need for centralized authorities, offers permanent recording of data and transactions, and provides a transparent and reliable record of assets. By understanding blockchain's fundamental principles, we gain insight into its vast possibilities and can explore how it can reshape industries and improve our lives.
Blockchain technology holds tremendous promise for revolutionizing industries and simplifying complex processes. Its ability to ensure transparency, trust, and security in data and transactions opens up a world of possibilities. As our understanding of blockchain deepens, we can fully comprehend its potential impact and embark on the journey of exploring its transformative power.
Cryptocurrencies: Decentralized Digital Money
Cryptocurrencies have emerged as decentralized digital money, operating independently of governments and traditional banking systems. Powered by blockchain technology, they offer secure and transparent transactions without the need for intermediaries.
Understanding Cryptocurrencies: Cryptocurrencies like Bitcoin, Ethereum, Bitcoin Cash, and Litecoin provide a digital alternative to traditional money. They enable global and near-instant value transfers, 24/7, with low transaction fees. These transactions are verified and recorded on a blockchain, ensuring security and integrity. Unlike traditional currencies, cryptocurrencies are not controlled by any government or central authority. They operate on decentralized networks, allowing anyone to participate in transactions.
Advantages of Cryptocurrencies: Cryptocurrencies offer unique advantages such as security, global accessibility, and the potential for more direct control over money. They are not subject to manipulation by central authorities, making them a secure and versatile form of value exchange.
The Rise of Blockchain Technology: Behind the cryptocurrency revolution lies the revolutionary technology of blockchain. As I mentioned before, blockchain drives secure and transparent transactions by validating and recording each transaction across multiple computers in the network. It eliminates the need for trust in centralized institutions like banks. Blockchain has transformative power across industries, bolstering security, reducing fraud, and streamlining processes.
Investing in Cryptocurrency and Blockchain: In this digital landscape, investing in cryptocurrency and blockchain technology is more crucial than ever. Cryptocurrencies like Bitcoin and Ethereum offer alternative investment avenues, diversifying portfolios and potentially providing high returns. However, it's important to note that these technologies are still in the early stages, making future predictions challenging. Stay informed, adaptable, and mindful of potential adjustments. Seek guidance from financial professionals who can assist in managing your digital assets.
The Transformative Potential: As I said before, Blockchain technology extends beyond cryptocurrencies and holds the power to transform various industries. By investing in industries that embrace blockchain, you can position yourself ahead of the curve and reap the benefits of enhanced trust and efficiency. However, investing in cryptocurrency and blockchain technology requires thorough research and understanding of market dynamics. Assess risks, stay informed about regulations, and choose reliable platforms or projects (More on reliable platforms below).
Cryptocurrencies and blockchain technology are revolutionizing the way we exchange value and conduct transactions. The decentralized nature of cryptocurrencies and the transparency of blockchain offer new possibilities and opportunities for financial growth. Stay tuned for more updates on the exciting developments in the world of blockchain as we continue to explore this transformative technology.
Centralized vs. Decentralized Exchanges: Understanding Your Crypto Access Options
In the world of cryptocurrencies, accessing digital assets like Bitcoin, Ethereum, and others involves using either centralized or decentralized exchanges. It's important to grasp the differences between these two types of exchanges to make informed decisions when navigating the world of digital currencies.
Centralized Exchanges: Centralized exchanges, such as Binance, Coinbase, and Kraken, are operated by a central authority. They serve as intermediaries, facilitating transactions between buyers and sellers while holding users' funds. To use centralized exchanges, users must create accounts, provide personal information, and adhere to regulations like Know Your Customer (KYC) and Anti-Money Laundering (AML). While centralized exchanges offer user-friendly interfaces and customer support, they also have control over users' funds, leaving them vulnerable to security breaches and potential hacking incidents.
Decentralized Exchanges (DEXs): In contrast, decentralized exchanges (DEXs) operate on a distributed network of computers, eliminating the need for a central authority. DEXs enable peer-to-peer trading directly between users through smart contracts. Users retain control of their funds, as transactions occur directly between their digital wallets. This decentralized nature enhances privacy and security since users do not have to disclose personal information or rely on a single entity to hold their funds. However, DEXs may have lower liquidity and can be more complex for beginners to navigate compared to centralized exchanges.
Choosing the Right Option: Ultimately, the decision between centralized and decentralized exchanges depends on personal preferences, expertise level, and the desired balance between convenience and security. Centralized exchanges provide a user-friendly experience but come with the risk of relying on a central authority. Decentralized exchanges prioritize user control and security but may require more technical knowledge to use effectively.
Understanding the distinction between centralized and decentralized exchanges is crucial when delving into the world of cryptocurrencies. Centralized exchanges offer convenience and user-friendly interfaces but involve reliance on a central authority and potential security risks. On the other hand, decentralized exchanges grant users more control and security but may require a higher level of technical proficiency. Assessing your preferences, expertise, and the desired trade-off between convenience and security will guide you in choosing the right exchange option for your cryptocurrency journey.
Recently, I had the privilege of joining Her Expat Life Community , alongside Shelley Schachter-Cahm , exceptional Chief Compliance Officer ????. Together, we discussed cryptocurrencies, blockchain technology and the empowering opportunities they present for women to learn and invest in securing their future. Watch here:
领英推荐
The next time Bitcoin?comes under fire for energy consumption, remember this statistic: the banking industry uses at least 56 times more energy.?From an energy efficiency point of view Bitcoin lighting is at least 1 million times more energy efficient! Learn more here:
On The Markets
Artificial intelligence (AI) is getting pretty popular among investors these days, and it seems like the bear market rally might be coming to a close. Let's dive into what's been happening.
Back in January, stocks were in a vulnerable state, and things got a bit shaky. We saw a 10% correction in the S&P 500 over the next six weeks, with the average stock taking a hit of about 13%. Since then, the average stock hasn't been performing as well compared to the overall index. Some say it's because of the increased cash flow from depositor bailouts and the growing fascination with AI among investors. That's made the market quite concentrated, let me tell you!
For the past few months, folks have been feeling a bit pessimistic about the market, and that hasn't been great for the average stock's performance. But things have started looking up recently! Sentiment has taken a bullish turn, and both regular investors and big institutions are jumping back into the stock market. And what are they interested in? You guessed it—technology and AI.
Now, here's where it gets interesting. While some experts and commentators confidently claim that the bear market is over and stocks are no longer set up for disappointment, it's important to consider all the factors at play.
For instance, let's not forget that the Federal Reserve chief mentioned last week that a strong majority of the committee expects two or more rate hikes. They didn't rule out consecutive meetings for these hikes either. This indicates that the Fed's stance may not be as optimistic as some hope. Rather than relying solely on these experts and commentators who declare new bull markets, it's crucial to assess the bigger picture. This involves considering fundamentals, valuations, and expectations.
To be honest, I anticipate weaker-than-expected earnings this year compared to the current consensus. As a result, we might witness a gradual decline as companies miss expectations one by one, or we could experience a sudden shock that disrupts the market. If such a shock occurs, the equity risk premium could rise, price-to-earnings ratios might drop, and we could see market price decline before expectations adjust. Remember our earlier discussion about increased Treasury issuance and its appeal? Well, that very development could be the shock I'm referring to, influencing the amount of money circulating.
I've been raving about how awesome Treasury bonds are, offering a sweet return of over 5% with virtually zero risk, especially when you invest in those short-term Treasury bills. They're like a safe haven for your money. But here's the thing: imagine if all of a sudden, people start yanking their cash out of Treasuries. It's like a mass exodus, with folks pulling their money out of banks left and right. Now, that could spell trouble for the banks, especially since they've already been dealing with a crazy amount of withdrawals lately.
To sum it up, sentiment and positioning in the market have undergone a complete turnaround since the beginning of the year, and many people are banking on a rebound in the second half. However, I remain skeptical. It's crucial to stay aware of these developments and be prepared for potential market fluctuations ahead. Keep a close eye on things and ensure your investing strategies remain adaptable, my friend!
This information should not be relied upon as research, investment or tax advice, or a recommendation regarding any products, strategies, or any security or digital asset in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change.
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What’s Next?
August monthly newsletter will dive deep into the world of AI and shed light on what you should know before venturing into AI investments. My goal is to equip you with essential knowledge to make informed decisions. I sincerely hope that this newsletter continues to serve as a valuable resource, keeping you up to date and well-informed.
Work With Me
Natalia Ivanova
Founder and CEO
Financial Planning Specialist
NewGen Wealth Creation LLC | Wealth Management
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Every day is dedicated to honoring the trust and faith my clients have placed in me.?I?listen to their concerns, understand their needs and continuously work to find solutions and structures that help meet their goals.
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NewGen Wealth Creation LLC is an Investment Adviser offering services in Puerto Rico and in other jurisdictions where it is exempt from registration. All views, expressions, and opinions included in this communication are subject to change. Please contact us if there is any change in your financial situation, needs, goals or objectives. The information contained in this electronic communication is intended only for the use of the recipient. For your privacy and security, do not include sensitive information using emails that are not secured.
Risk Considerations: There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the portfolio will decline. Market values can change daily due to economic and other events (e.g. natural disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, investors can lose money.