Tag Archives: Fintech

Crypto & Blockchain

I tweet (@robertVERITAS) a lot about crypto and blockchain technology.  It is important to be open. What makes me strongly believe in crypto is its value-creating uses, which are largely based on its underlying technological platform Blockchain.

Blockchain and value creating

An easy-to-read introduction to Blockchain in Swedish (which only scratches the surface and is simplified, but still correct and easy to understand) can be found here.

I have been following the development of technology since its inception. I, like many others I guess, did not realize at first the very idea behind crypto: its underlying and in many ways value-creating Blockchain technology.

Decentralization, Decentralized Finance (DeFi), independence from centralized institutions (eg banks), faster and verifiable information, more efficient and independent transactions, smart contracts, e-commerce systems (eg major clubs in sports use own or existing crypto / coin / token which supporters can buy merchandise, tickets etc with – NBA, premier league etc) are some of the concepts and uses.

Here are other Blockchain Applications: Supply Chain, Management, Healthcare, Real Estate, Media, Energy, Record Management, Identity Management, Voting, Taxes, Non-Profit Agencies, Financial Management and Accounting, Cyber Security, Big Data, Data Storage, IoT.

Many steps have been taken since the start and the areas of use have become mainstream.  Recently, tech giant Intel revealed that it had invested in NASDAQ listed Coinbase (crypto exchange). And we’re all familiar with Tesla and Bitcoin & Dogecoin. Elon Musk and Jack Dorsey (the entrepreneur behind Twitter and Square) are just a few of the successful entrepreneurs who have invested heavily in Crypto and Blockchain technology.  Amazon recently recruited various experts in Blockchain and crypto.  IBM (massive investment in blockchain technology development and holders of many patents in the field), Microsoft (Azure Blockchain Service), Maersk Shipping, Samsung, Sony are some other examples. There is a lot of information online about all the companies that use Blockchain technology in their business.

Institutional investors

The pressure from institutional investors is great. The line of companies developing different ways to incorporate cryptocurrencies and blockchain technology is growing steadily. Cryptocurrencies simply remove intermediaries and banks because they are decentralized. Blockchain technology not only makes transactions faster but also more secure compared to traditional methods.

Institutional investors such as banks naturally see the opportunity to make money, as a growing part of the population wants to invest in cryptocurrencies. It is hardly a coincidence that several US financial institutions have applied to offer ETFs in cryptocurrencies and an approval in the US does not seem to be far off. Crypto-based securities are permitted in several European countries and also in the United States’ neighbor Canada. Several European and Canadian brokers have long offered indirect ownership in several cryptocurrencies through exchange-traded products (ETFs) with different cryptocurrencies as the underlying asset.  In Sweden, the two largest online brokers Avanza and Nordnet have several different exchange-traded products with cryptocurrencies as the underlying asset.  Just as financial institutions make money on people’s interest in investing in funds and equities, so institutions make big money on people’s willingness to invest in crypto. Financial institutions thus have a strong incentive to drive and lobby for progress and provide cryptocurrency-related securities.

There is a fairly intense pressure in the US from various parties for the SEC to approve the first bitcoin ETF. Among other things, the respected and well renowned fund manager Vaneck has on several occasions applied for crypto ETFs to be approved.  There is no doubt about the reason for these applications and pressure – a growing demand among investors to invest in Bitcoin. As a temporary (?) solution for American fund managers, there are today a large number of funds and ETFs where various companies linked to crypto and the Blockchain industry are included. Thus, only a direct exposure to crypto is not yet permitted. And the important thing to bring here is the reason for these pressures as well as the increased supply of crypto investments: demand.  Why do we see this development among large companies and institutional investors around the world? First and foremost, it is based on the opportunity to make money. Cryptocurrencies simply remove intermediaries and banks because they are decentralized. International transactions are incredibly much faster than traditional bank transfers. Blockchain technology makes such transactions not only faster but also more secure compared to traditional methods.

Another factor is, of course, the large and hitherto ever-growing part of the population that owns and uses cryptocurrencies.  Surveys show that a large proportion of young people already own cryptocurrencies and they grow up with digital currencies and are used to using it, eg for in-game purchases.

Central banks and digital currencies

Something that ironically gives support to the benefits of Blockchain technology and digital currencies is that many of the world’s central banks are working on developing digital national currencies. One reason is that the technology, as already mentioned, simplifies both cross-border (international) payments and money transfers.  Among other things, Sweden’s central bank has been investigating since 2017 the possibility of issuing an e-krona, Swedish kronor in digital form available to the public, to supplement cash. By improving and expanding the use of central bank money in digital form, it will be possible to better meet future payment needs, promote innovation and simplify cross-border payments.

Briefly about Blockchain Technology

With blockchain, all parties in a chain share the same digital ledger. In order to add or change information, it is therefore necessary that everyone’s versions of the information are updated and verified. In addition, it is not possible to delete events, only add new ones. This makes it much more difficult to falsify or destroy the information that is available, whether it is money transactions or online sites and articles. With blockchain, it would be possible to verify and trust information in a completely different way than is possible today. A blockchain is instead a decentralized data chain, where everyone in the chain has access to all the information from all parties that is necessary for their task. So everyone has a copy of the same digital ledger. When someone completes a transaction in the chain, all copies of the ledger are updated using peer-to-peer technology. In short: all transactions are stored on all computers that are part of the chain.

Information that is added forms blocks, where each block is encrypted and connected to the block that was created before using a hash (an encrypted code that in theory is unbreakable) and a time code. This allows the information added to be verified securely. It is also not possible to delete blocks, only add new ones, which means that it is not possible to make changes without it being noticed. Instead of developing a solution that everyone can use, they design a common technical solution where trust is distributed in such a way that no one needs to rely on a single party.

My investments

I do not daytrade crypto. I have, in various forms, been invested in crypto for some years now.  I’m now in a position where I don’t have to (mind you, I still do but without acting on it) panic at major drops. Because my portfolio have been successful as to date. That is not to say that I did not make losses. In the first years, for example, I sold bitcoin on two or three occasions after it had really dropped. I do not remember the exact price back then, but it was around 3,000 and 6,000 dollars respectively. Had I kept my investment it would of course have made me even more successful. But I began to understand more and more and began to see patterns in the trade. Identified various resistance levels. Etc.

I try to focus my holdings on what is value-creating. This is where the above-mentioned areas of use come in. For these reasons, I currently own Ethereum, Chainlink, Binance Coin, Solana, Compound, Aave and Chiliz. In addition, I own Bitcoin and Dogecoin. The former I have been invested in for a long time. The symbolism is important here, I think. Bitcoin is still crypto for many. This is the cryptocurrency most first-time buyers buy. Bitcoin is somehow crypto personified and is considered to stand for something revolutionary, decentralized and free from prevailing systems. Somewhat comparable to the philosophy behind WallStreetBets, although of course there are big actual differences. Here it is important to be aware of trends and to keep up to date with institutional investors, entrepreneurs, capital-rich investors and other large and influential players.

I would also like to emphasize that my investments in crypto and Blockchain do not carry a majority of my portfolio.  Instead, I stick a lot to biotech, medtech, green energy, tech, possibly etc. Read my blogs about these stocks/companies also here on my site.

Do not forget to read the disclaimer.

All the best,