Digital currencies are seeing greater adoption and a lot more clarity regarding their regulatory status’. However, for many traditional investors, the technological intricacies surrounding cryptocurrencies is still unchartered territory. A week ago, CEO of Euro Pacific Capital, Peter Schiff made the headlines within the crypto community when he took to Twitter to blame Bitcoin when he could no longer access his bitcoins because he mixed up his private keys and his passcode.
For many investors, Bitcoin and cryptocurrency still remain hard to comprehend. Companies like Grayscale Investments bridge this divide and act like an investment banker – managing investors’ digital assets. In 2019, it was reported that Grayscale registered over $600 million in crypto investments. In the latest episode of the Rational Reminder podcast, Michael Sonnenshein, Managing Director at Grayscale Investments spoke at length about how digital currencies today represent an asset class and about Grayscale’s utility for investors.
Speaking about why investors prefer using financial instruments to gain exposure to the digital asset class, Sonnenshein said that when it comes to Bitcoin investors need to examine and vet who they are buying bitcoin from and the credibility of such a counterparty. Even though bitcoin can be purchased individually, the technical knowledge required serves as a huge barrier for many.
He went on to add, “You will also need to have the technological know-how to be able to move the bitcoin to a wallet, to be able to keep your password secure and be able to safe-keep it on a longterm basis. And for most investors, that is a new and unfamiliar experience.”
He also highlighted how the Grayscale products address these challenges and allow investors to gain exposure to digital assets in “a way that feels super traditional or more akin to their experiences with investing in other financial instruments.”
When the conversation steered towards bitcoin versus gold and which serves as a better store of value and an inflation hedge, Sonnenshein said that the key differences between bitcoin and gold are seen with regards to bitcoin’s greater divisibility, portability, and its versatile utility.
“Bitcoin lends itself to amazing applications, most of which we barely scratched the surface on, whereas gold has really become an asset that’s primarily held by central banks and governments and has very limited utility”