Are crypto currencies right for your clients?
Daniele Mensi, CEO of Nexthash looks beyond the headlines and what constitutes a viable crypto investment and where blockchain investment platforms fit in.
Investment opportunities today are rife with platforms such as football stocks and forex trades being advertised on every other billboard on each commuter train. However, for many, there is a lot of scepticism around these platforms, their validity, and how trustworthy they are.
It was recently announced that the number of cryptocurrency businesses in the crosshairs of the UK’s financial watchdog leapt by 74% in the past year, as the Financial Conduct Authority (FCA) estimates that consumers have lost at least £27m in crypto and foreign-exchange scams.
The FCA now has 87 inquiries on its books into crypto companies, compared with 50 this time last year, according to recent data. The number includes early-stage scrutiny as well as full-blown enforcement investigations.
Legitimate players in the cryptocurrency arena will be pleased to hear this announcement from the FCA as we need to ensure that actors who defraud people are removed. There is a huge amount of potential and opportunity in the digital economy, but we need to ensure that retail and sophisticated investors alike have confidence in the sector.
So what are viable investments for people looking to diversify their portfolios? Well, first, what is important to note is that the audience for crypto investing is slightly different from those who advertise SIPPs, Venture Capital, or tax-efficient investment opportunities. Many are still targeted at sophisticated or professional investors who understand the risks, rewards, and jargon that comes with different digital products, but some are also aimed at new retail investors.
The reason for this is that, for many, there are significantly lower fees and a reduction of the number middle-men involvement. This means that people have more direct control of their investments. With currency and forex investments, the process can be very simple, and users can make investments with the touch of a smartphone. However, for some, this sounds like too much control for the investor with limited external help or interference. This is why these products are aimed at educated retail investors with some disposable income and a keenness to understand and know more about the space.
That is why so many in the crypto space utilise Telegram rather than Whatsapp or email as a more secure way to transfer information and share insights.
These people tend to be millennials who may work in the tech or finance sectors and understand the basic growth opportunities with high-tech, high-growth startups.
Particularly in cities such as London, New York and Berlin, these young people are growing with the sector and the business, so understand better than most about growth opportunities in that space. Contrary to previous periods of financial growth in history, businesses are not doing what they’ve always done, which is list on a stock exchange.
With various political and economic influences affecting businesses today, investors are looking for ways to gain rapid and secure returns on their investment on an international scale. IPOs, or companies listing on a stock exchange, have been receiving a substantial amount of negative press, in particular, WeWork and its operating losses and valuation, and this is worrying both institutional and retail investors who are looking for a better and more secure solution to access internationally facing high growth startups.
Blockchain investment platforms can help make global growth finance for scaling technology businesses more transparent and easy to access.
Both individual and institutional traders will be able to engage more with blockchain technology-backed trading, where the businesses are backed by a Digital Security Offering and there exists a greater potential to make rapid returns on their investments than the traditional routes. As this is adopted into the mainstream, it will revolutionise the way companies in Britain will access scale-up finance, how investors will access these businesses, and how illiquid shares can be traded into liquid capital in ways never imagined before.
As Britain prepares for Brexit and WeWork shelve its IPO, new forms of investment could be crucial for these scaling businesses as well as global investors who want to maintain access to the UK marketplace.
With these new products and offerings, they are offering both businesses and investors different options for investment and growth by using the volatility of cryptocurrencies and the high-growth nature of the companies to achieve fast, liquid returns in a standard supply and demand format. These platforms, such as the digital exchange platform Nexinter, have been built from the ground up to offer scaling, internationally facing companies, the chance to be in front of an educated investor base who see their true value in the marketplace, not hyperinflated valuations which so many unicorns are subjected to.
In short, there are a number of different options in crypto investing, from trading currencies to utilising token offerings. These products may not be for everyone but are designed to be used by more than traditional stock trades. This transparency in the market will help build trust and regulated and compliant platforms like Nexinter will continue this push towards market confidence and critical mass acceptance in the coming years.