Fixed Income-Like Cash Flows in Digital Asset Markets

Article
July 23, 2024

The BTC Bubble of 2020-2021

Beyond the confusion, skepticism, and intrigue of Bitcoin, digital assets are revolutionizing finance. As the poster child of cryptocurrency, Bitcoin has grabbed headline attention due to its novel technology and tremendous volatility. The notable crypto bubble of 2020 and 2021 saw Bitcoin surge from around $7,000 in January 2020 to a high of nearly $69,000 in November 2021. The popularity of digital assets stemmed from a range of factors, including institutional investment, the idea of using cryptocurrencies to hedge against inflation, and a $69.3 million NFT sold by Christie’s.

Resurgence of Digital Asset Investing

Despite apparent volatility, interest in digital assets has seen a resurgence with both Bitcoin and Ethereum spot ETF approvals in 2024, widening exposure to crypto investing. This improved accessibility and structure to digital asset investing has renewed investor confidence and sparked significant inflows into the market.

However, digital asset investing can be much more than just capital appreciation.

Fixed Income-Like Cash Flows in Digital Asset Markets

The proof of stake (PoS) consensus mechanism is a key driver in revolutionizing digital asset investing. Unlike the proof of work(PoW) mechanism used by Bitcoin that validates and secures transactions on the blockchain by solving complex mathematical problems, PoS allows participants to validate transactions and create new blocks by staking their tokens as collateral. In exchange, these participants receive rewards that can resemble fixed income cashflows.

Additionally, digital assets offer other income-generating opportunities such as lending and providing liquidity. Decentralized finance (DeFi) platforms like Aave and Compound allow users to deposit their digital assets and earn interest from borrowers, similar to the way traditional financial institutions operate. Decentralized exchanges (DEXs) like Uniswap and SushiSwap enable users to provide liquidity by depositing their assets into liquidity pools and earning a share of the transaction fees generated by pool activity.

These income sources present more opportunities for digital asset investing, continuing to expand the investor base in digital asset markets.

Moving Forward with Entoro Capital

Entoro Capital is at the forefront of digital asset investing with a proven track record in digital asset technologies, valuations, and funds. Connecting accredited investors to secure and qualified investment opportunities, Entoro is committed to advancing digital asset investment strategies and giving clients exposure to alternative markets.

Disclaimer: This blog post is for informational purposes only and should not be considered as financial or investment advice.

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