How Blockchain is changing, people will invest their money

Asset tokenization has been regarded as one of the most exciting use cases of blockchain technology. Especially the asset management industry is anticipating a high impact on their environment.

A main beneficiary will be the small investor that has been stuck with standard investing products for a long time. Low interest rates and high inflation combined with almost no alternatives to stocks and real estate make it difficult for people to build wealth. Here is how asset tokenization will change that.

Asset tokenization: a game changer?

Asset tokenization has been regarded as a major influence in the future of asset management and investing. People often reduce crypto assets to a few projects like Bitcoin or Ethereum and underestimate the real potential of the underlying technology - the blockchain.

Here is what asset tokenization will enable: As an investor we are sometimes excluded from certain asset classes like private equity, luxury goods and real estate. The reason for that is simple: the entrance barriers are too high for small investors who are willing to invest 500 USD. Asset tokenization dissolves those restrictions. Ownership in real-world-assets is tied to a digital token that can (theoretically) be split into infinite fractions. Small investors will be able to invest in exclusive paintings from Picasso, in Oldtimer and in private markets.

Those asset classes will no longer be a privilege to high net worth individuals or large corporations - but to everyone who wants to invest.

Why does diversification matter?

Diversification is the only free lunch in investing - that is one of the main statements from the modern portfolio theory, developed by Harry Markowitz. The more you diversify, the better your risk-profile. The main goal is to achieve a maximal return with a minimal exposure to risk. The more you spread the risk to different (non-correlated) asset classes, the better.

What role does asset tokenization play? It allows investors to add more asset classes into their portfolios. Especially luxury goods and private equity turned out to be quite resistant against public market corrections. Companies like Facebook, Airbnb, Uber or Beyond Meat developed the largest fraction of their market value as a private company. The returns from early private equity investors are a multiple of what public stock investors did. Those opportunities will be accessible for small investors through asset tokenization, if regulation allows it.

All in all we at Bitcoin2Go feel like asset tokenization will be a game-changer for portfolio diversification. Everyone will be able to build a highly diversified and individual portfolio that saves them from low interest rates and high inflation.

Investing like HNWIs made simple

HNWIs have been known for being able to invest in almost anything. Certain asset classes remained a privilege to this class of investors, which is unfair. Small investors should be able to have the same success.

Asset tokenization means a democratization of asset management. Every asset is accessible, no privilege to the wealthy.

Remember: this is not a process that will switch overnight. It’s going to take years until this is reality. There are already a few companies offering access to tokenized assets like Tokenstreet (Germany), Securitize, tZero or ADDX. The development depends on the regulatory environment, which is highly advanced in Asian countries in comparison to Europe.

Author Bio

Carlos has been in the digital assets & fintech industry for almost 4 years now. Currently he is working for Bitcoin2Go as a content creator with focus on digital assets.