Commentary: Cryptocurrencies could become viable asset class for investors

INVESTORS NEED MORE CERTAINTY TO INVEST IN CRYPTO WITH CONFIDENCE

As it stands, large institutional investors either shy away from the sector or dabble in it in “venture-capital mode,” investing at an individual-company level. If they are to start regarding cryptocurrencies as an alternative asset class – like fiat currencies, commodities, or derivatives – three conditions must be met.

First, there must be clean and reliable data. Here, the cryptocurrency market has made important strides. Although financial information remains imperfect and incomplete, many data providers now go beyond pricing data, at least for the largest cryptocurrencies.

Key players in the traditional finance sector – such as the S&P Dow Jones, with its Digital Market Indices portfolio – provide an important methodological benchmark for constructing such data and ensuring its credibility.

Second, we need research that facilitates a deeper understanding of cryptocurrencies as an asset class.

Academic research has underpinned the creation of a number of new asset classes, such as derivatives and index funds, not to mention investment approaches like factor investing. Now, important progress is being made on cryptocurrencies.