Crypto Assets: A New Way of Diversifying Your Investments

Abstract

International investments have gained momentum since the start of this century. Many investors in the developed economies invest in the growing economies to seek prospects of higher returns. This has become evident in the last two decades, especially after the financial crisis of 2008, when investors were forced to think outside of the box in order to get proper returns for their investments. Investing has become even more challenging when investors are faced with low and even negative yields, especially in the investments on short and medium term. This is where crypto assets come in the picture. Namely, with the appearance of the blockchain technology and all of the new opportunities it brings, crypto assets appeared as a new way for investors to diversify their investments and get higher returns. Though they bring additional choices to investors, they can also be very tricky and should be taken into consideration when investing with high cautiousness, simply because the technology they are based on is relatively new and not very much regulated, thus they bring higher risk than the traditional assets and fiat currencies that are already available. Having that in mind, this paper goes over the pricing, volatility and correlation of crypto assets with other currencies. Additionally, we look at the way they are regulated so far, how accessible is the market for them and their behavior vs the traditional fiat currencies. Lastly, we come to the conclusion that crypto assets, though being more volatile and riskier than fiat currencies, do in fact bring additional return to an investor’s portfolio and should be used carefully according to the individual risk and return preferences. There is still a lot to be examined and researched about crypto assets so that they can be better utilized in the future by investors.