What is an asset?
According to Investopedia, “an asset is a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit“.
Is fiat currency an asset? It is a resource but it should not be classified as asset simply due its inability to hold its value for the keeper’s future benefit. In short, its value depreciates over time.
Investors are always in search for viable asset to grow their wealth. Correct investment in assets such gold, bond, property, stocks can provide safe haven in economic downturn and wealth boost during good times.
The advent of internet has changed the selection of assets for investment. Traditional asset such as stocks is still preferred choice but the choice of stock portfolio has changed over time from asset heavy corporation (e.g in rail, oil & gas, mining industry) to technology based company with large soft assets (quality R&D patents and brand name). In 2018/2019, the top 8 company with highest market capitalization are technology based company (with exception of Berkshire). This is stark difference compare to merely 10 years ago, where likes of ExxonMobil, General Electric, AT&T dominates the market. Here is a Youtube link if you interested to see time progression change for top 10 company with highest market capitalisation.
While traditional asset classes are here to stay, the investment portfolio are fast expanding to include digital assets as a hedge against deteriorating fiat currency value. Examples of digital assets; website, blogs, cryptocurrency, digital collectibles, domain name and the list is expected to grow with more real world items being digitalised.
Globalisation, digital creativity and unlimited boundary fuels online participation. According to “The Telegraph” news, the average person spend more than a day in a week online, twice as long as 10 years ago. The time and attention people spent on internet drives growth and adoption of digital asset. This is unstoppable with the growth of younger generation in our population.
Growth of digital asset and value
Remember Cryptokitties? It is the world first digital collectibles that was founded in 2017. Till date, it still ranks as one of the most frequently transacted collectibles in Opensea, which is a Crypto collectible market. The highest price paid for a cryptokitty is a whooping $170K (so far).
The first crypto stamp is conceived by Austrian postal in 2019, which led the way for future digital stamp collection. In today’s secondary market, a rare stamp can reach up to $10K. Moving away from stamps, F1 race cars are becoming digital collectible items in F1 Delta Time. A sleek car called 1-1-1 is sold for $100K. Never mind it being pixel generated car. With whopping 506million global fans of F1 sport league, a unique pixel does have value in the eyes of its beholder.
A perfectly located land in virtual world was recently sold in Decentraland for more than $ 100K. Digital land transaction are growing in volume and becoming a hedge against falling crypto prices. Beyond its pixel, lies opportunity to use the land to build virtual shops for selling goods, advertisement or simply banking into the growth of digital world user for land capital appreciation.
As for Bitcoin, grand daddy of cryptocurrency and blockchain technlogy, its spectacular price appreciation requires no introduction. It is on the verge of becoming a store of value in real and digital world.
The real world assets are heavily owned by institution investors and it is not easy for average retail investors to make an entry. Digital asset at its early age may offer this opportunity for retail investors and they can be rewarded with respectable capital growth if selected projects become successful. But judgement must be made careful and only invest what we can afford to lose because the risk is extremely high.
Disclosure: I am invested in Decentraland and Crypto stamps when this article was written. Any information, commentary, recommendations or statements of opinion provided here are for general information purposes only.