How to navigate a new asset class with confidence
Litecoin, bitcoin and ethereum are among the most commonly used crypocurrencies today. supplied
Earlier this month, Sotheby’s announced that it is now accepting payment in cryptocurrency. The first artwork on auction in this new landscape is Love in the Air by Banksy, expected to sell for the equivalent of somewhere between $3-million and $5-million (U.S.).
In February, Tesla made headlines by buying $1.5-billion in bitcoin. While founder Elon Musk is known for making enormous bets on long shots, this may be one of his more conservative moves – one of America’s oldest banks, BNY Mellon, recently announced that it will also hold and trade in cryptocurrencies to meet its customers’ demands. Starbucks, Whole Foods, Home Depot and Air Canada are familiar names on a much longer list of corporations that now accept payment in cryptocurrency.
“Big corporations like Square and Tesla are buying up bitcoin and putting it on their balance sheet,” says Mitchell Demeter, the president of Vancouver-based Netcoins. “The New York Digital Investment Group, the bitcoin subsidiary of Stone Ridge, just partnered with Fidelity to offer cryptocurrency investments through a few hundred different banks across the U.S.”
But what does this mean for Canada’s business sector? And for Canadian investors?
“Retail and institutional investors are moving into cryptocurrency as a hedge against the shrinking buying power of the U.S. dollar, the Canadian dollar and the British pound,” says Mark Binns, CEO of BIGG Digital Assets. “These governments have printed an enormous amount of money during the pandemic, so cryptocurrency is now seen as a safe haven.”
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It belongs in every portfolio, but it is very early days. When bitcoin went from $12 to $200, a lot of people assumed they’d already missed the boat.
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Despite the fact that bitcoin has been around since 2008, “we’re still watching the emergence of a new asset class,” says Mr. Demeter. “It belongs in every portfolio, but it is very early days. When bitcoin went from $12 to $200, a lot of people assumed they’d already missed the boat.”
Instead, he says, there have been many such cycles, and we’re still in a period that can be compared to the mid-1990s and the early days of the dot-com boom. “There are a lot of unknowns, so it’s important to invest through a credible organization that can help you ensure the currency you’re buying isn’t connected with nefarious actors. But the biggest opportunities are still ahead – cryptocurrency will change the financial system for decades to come.”
BIGG Digital Assets, which owns Netcoins and the Blockchain Intelligence Group, is built on the assertion that the future of cryptocurrency is a “safe, compliant and regulated environment,” and Mr. Binns sees the recent entry of traditional financial institutions into the space as a tipping point. “The big banks are seeing that they’re missing out on this massive business and feeling the pressure to offer these services, as companies like Coinbase offer bank-like services, such as credit cards, savings accounts and payments. As a result, we’re seeing even Mastercard and Visa moving into cryptocurrency.”
To help investors along the learning curve and to avoid pitfalls, Netcoins offers an education platform called the Crypto Academy, says Mr. Demeter. “It covers a lot of the questions that people first encounter, and it’s constantly evolving. New things come up, so we’re always adding new articles and reference points, and making sure our support team is up to speed to answer any questions that our customers have.”
Part of this essential education is being up to date on potential scams, so the site includes warnings as threats arise, he adds. As burgeoning payment capacity increases investment demand, a lack of familiarity and potential links to shadowy players mean that transparency and security remain critical.
While it may seem like cryptocurrency is unregulated, being owned by a public company also means that Netcoins undergoes annual audits on its financials, controls, operations, and policies and procedures, says Mr. Demeter. “There’s a much higher level of scrutiny versus other private companies, which means that investors can have more confidence.
“We’re seeing the evolution of these cryptocurrencies into secure, decentralized platforms where an investor can interact with other investors around the world without going through a centralized authority, like a bank – investors are watching the space closely because it will present opportunities not seen in traditional finance.”
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