Given the current global economy, where inflation and supply shortages are constant threats, there has never been a better time to make this change.
The price of Bitcoin, along with that of the other major unbacked crypto assets, has fallen by more than half since November 2021, amid a changing environment. In fact, the global cryptocurrency market capitalization at the beginning of August was $1.2 trillion, down 39% from a year ago, according to data from CoinGecko.
Cryptocurrency markets have always been volatile, but they also provide many different advantages and opportunities. The biggest of those advantages is the backbone of the Blockchain on which the cryptocurrency market is built.
With this in mind, what if the underlying traditional financial infrastructure were changed so that investors could more easily take advantage of today’s technology, diversify their investments, and protect themselves from the risks that volatility brings?
Blockchain Systems Must Replace Traditional Financial Infrastructure
Replacing legacy infrastructure with Blockchain-based systems can open up a new world of choice, community, control, and transparency for investors. For institutional crypto investors, returns are 100% correlated to the cryptocurrency market.
The ability to invest in a more diversified slate of traditional assets on the Blockchain would allow investors to hedge against crypto winters more directly within asset classes that are not subject to crypto market movements while allowing them to take advantage of the latest financial technologies.
When new types of investments are added to the Blockchain, crypto investors can take advantage of other asset classes that were previously out of their reaches, such as real estate and mortgage-backed securities, thereby diversifying their portfolios and limiting their exposure to risk.
This type of system – offering digital experiences that link traditional finance with Blockchain and first-of-its-kind digital securities – needs to be widely adopted and implemented as soon as possible. Is it a good starting point? The real estate and mortgage-backed securities (MBS) market, which deals with mortgages that are packaged together with hundreds of other mortgages and then sold to investors.
Blockchain-Based Infrastructure Helps Offer Finserv an Edge over Competitors
According to a recent Deloitte study, 97% of pioneers in the financial services industry see Blockchain and digital assets as another way to gain a competitive advantage.
In typical securitization, the process of coordinating updated documents and data between stakeholders is manual and inefficient. Blockchain-powered securitizations can enable instant validation of all data and documents in an offering against the immutable records of the Blockchain, meaning that the data used by all parties is always accurate and up-to-date.
Additional data from third parties, such as TPR managers and companies, can also be incorporated, creating a single, accurate source of truth for all parties involved in a securitization. This level of transparency, accuracy, and real-time validation is something that has never been possible before.
Reconsider the structure of today’s market and the future of tomorrow’s Blockchain
What is needed today is a new path to help investors diversify their risk exposure and hedge against volatility amid the market challenges we face in the future, both short-term and long-term.
When Blockchain technology replaces legacy traditional financial systems, it is like replacing centuries-old lead pipes with a modern, efficient and secure system that makes everything work better. In today’s financial services industry, the time has come for a Blockchain-based makeover.
By Audy Castaneda
