Since bitcoin’s introduction as the first cryptoasset in 2009, this new asset class has generated considerable interest and excitement. A cryptoasset is a private digital asset that uses cryptography and serves as a medium of exchange. The most well-known cryptoassets are cryptocurrencies, such as bitcoin, that permit buying goods and services or trading them for a potential profit. However, cryptocurrencies are not like using cash and are not very “money-like.” Thus, many people holding cryptoassets view them as investments and expect their value to rise.
Besides cryptocurrencies, other types of cryptoassets include security tokens, utility tokens, stablecoins, and tokenized securities. The price of many cryptoassets can be unpredictable and highly volatile, making them risky investments. Some, like bitcoin, are well-known global brands trading on exchanges around the world. Still, others have a much smaller market presence.
What is sure about cryptoassets is that they are here to say. According to CoinMarketCap, a popular data aggregator, more than 6,000 different cryptoassets exist, with many new ones created each month. The presence of multiple cryptoassets occurs because their creators optimize the underlying blockchains for different uses. As of the submission of this publication, the market capitalization of various cryptoassets is in excess of $1 trillion. In late September 2020, cryptoassets had a combined market capitalization above $350 billion. Major financial institutions, endowments, and hedge funds are involved in cryptoassets, as are retail investors.
Cryptoassets, especially larger assets such as bitcoin, are attractive to investors because of potentially high returns. However, high volatility accompanies high returns. Another potential benefit of including bitcoin in an investment portfolio is its low correlations with traditional assets such as stocks and bonds. Thus, including bitcoin in a portfolio offers diversification benefits. Over time, however, bitcoin’s low correlations with other asset classes are likely to rise. Bitcoin is currently an early-stage investment opportunity, and its core drivers differ from those of other assets. Despite the investment opportunities offered by bitcoin and other cryptoassets, investors entering this market face substantial challenges, including low quality of information, a lack of sound or academically defensible valuation models, regulatory uncertainty, and inadequate due diligence.
This book’s goal is to provide curious investors and others, such as investment practitioners, academics, and students, with a useful guide to understanding cryptoassets and their role, in any, in investment portfolios. To accomplish this aim, The Emerald Handbook on Crypoassets: Investment Opportunities and Challenges consists of 22 chapters divided into five sections. The first section examines the cryptoasset landscape from several perspectives – regulatory, tax, accounting, auditing, and investing and settlements. Next, the focus turns to different types of cryptoassets like cryptocurrencies, security tokens, utility tokens, stablecoins, and tokenized securities. The third section discusses investment opportunities and challenges of cryptoassets. Section four reviews trading, reporting, and other Instruments. The final section examines decentralized and centralized exchanges and the future of cryptoassets.
This volume spans the gamut from theoretical to practical while offering the right balance of detailed and user-friendly coverage. Discussion of relevant research permeates the books. Although other books are available on cryptoassets, especially cryptocurrencies, few examine this topic from an investor’s perspective. Scholarly, edited books, including academics and practitioners’ contributions on the investment opportunities and challenges facing cryptoassets are absent in the marketplace. This book helps to fill this gap and contributes to the growing field of cryptoassets.