Cryptocurrencies in context

We often hear about new cryptocurrencies that go on the market. Together with these new financial instruments such as Options Y Exchanges where these assets that are created are exchanged.

This is an industry that has grown exponentially. Some feel that it is something that must be rushed to buy so as not to be left out of this phenomenon. However, when trying to assess whether an asset is worth buying, establishing whether or not it is a good value is essential.

And it is that in the world of cryptocurrencies, valorization presents several challenges. For example, if I have to value a share, or estimate how much it is worth to buy a percentage of a company, there are methodologies that allow us to approximate a number. Therefore, we can use the present value of the future flows that it will generate, adjusted for growth or other means. But, How can the value of Bitcoin be estimated and how can it be incorporated into the investment portfolio, for example?

Before starting, It should be noted that any investment must be made within the vision and strategy of your portfolio., preferences and risk tolerance. So, the percentage you decide to include in this type of assets must follow the rules previously described.

But, If we want to understand a little more about this asset, it is important to put it in context. In fincratic We tell you what you need to know to enter a little more about cryptocurrencies.

The first “White Paper” attributed to Satoshi Nakamoto (alias creator of Bitcoin), began to circulate in October 2008. This date is important, because It is the most critical moment of the great financial crisis from that time. At that time, giant investment banks collapsed causing millionaire losses and putting the financial system at risk world. In fact, it is here that the seeds of cryptocurrencies begin to take hold as a critic and seek to disrupt the established financial system.

A relevant fact when it comes to understanding the “fanaticism” that is sometimes behind those who support this industry. His argument is that it is not only a good investment, but a new system that does not depend on mistakes and irresponsibility. that people can cause.

Besides, in the economy we find that countries have Central Banks and its role is to control inflation, or in some cases maximize employment. Nevertheless, these entities have challengesbecause they make decisions that sometimes depend on other entities to execute them: For example, For a Central Bank to reach the people, it must go through the banks. In addition, monetary policy (management of interest rates, among others) when not executed correctly can cause hyperinflation.

In the case of cryptocurrencies, for example Bitcoin, has its own monetary policy which is scarcitythat is, there is a limited number of Bitcoins that can be “mined”, which should put some kind of floor on the value, but on the other hand it lacks centralization that keeps it away from this type of error.

If the argument is an alternative to the world of centralization, cryptocurrencies sound like the future. The problem is that to date price movements have not behaved in this way, Like when Russia’s invasion of Ukraine began, cryptocurrencies moved in a similar way to the Nasdaq, that is, they behaved like a financial asset with high volatility. In short, we still see a high correlation to financial markets.

On the other hand, cryptocurrencies have the challenge that is the difficulty of valuing them, especially when there is not a limited number of coins that can be obtained. That is why great scholars like Eugene Famma (Nobel Prize in Economics for the Three Factor Model) and Nouriel Roubini (NYU professor) are strong opponents to incorporating this type of asset in your portfolio and maintain that the value of these coins should be 0.

Whatever your position in this debate, the incorporation of this asset has to include all these points so that it can fulfill the appropriate function in your wallet.