A digital asset investor is an investor willing to invest his capital in digital assets. Despite initial reluctance from most institutional investors and the majority of retail investors, most of them are turning into digital asset investors. The term digital asset can be used broadly for a vast range of assets presented digitally. Investors have different options for investing in these digital assets.
What are digital assets?
There are various definitions of digital assets. From an investor’s perspective, a digital asset can be defined as: “An asset that you can buy, sell, and store in a digital form and whose value is driven by the claim of ownership”.
You cannot touch and physically hold digital assets, just like intangibles. Digital assets can be stored and transmitted using cryptography. The digital ledger that helps transmit and store these transactions is called “blockchain”. Most commonly, digital assets refer to cryptocurrencies, crypto tokens, NFTs, and similar cryptographic assets.
So, an investor that buys or sells digital assets can be referred to as a digital asset investor.
Digital assets are traded electronically without ever using traditional paper documentation. Blockchain technology enables the decentralization of digital assets that further makes it easier to perform all trading tasks.
Digital assets are traded electronically without ever using traditional paper documentation. Blockchain technology enables the decentralization of digital assets that further makes it easier to perform all trading tasks digitally. This has been one of the main reasons for the increased number of digital asset investors.
Types of digital assets investors can buy
We wrote a broader definition of digital assets because the world of digital assets is evolving at a rapid pace. Blockchain technology and cryptography have made it possible to create new digital assets every passing day.
Cryptocurrency and crypto tokens are the most widely used digital assets today. They are also the assets that attract the most attention from digital asset investors. Thus, there are thousands of cryptocurrencies in the digital market currently.
It is pertinent to mention that the transformation of digital assets has taken place beyond cryptocurrency. For instance, the finance world is embracing blockchain technology that will soon pave the way for an expected transformation of the financial system, in a similar way to what the internet changed financial markets.
Here are a few most widely used examples of digital assets:
The most commonly used and acknowledged form of digital assets is cryptocurrencies. These are digital currencies (or coins) that are built on cryptography.
Bitcoin, Ethereum, Litecoin, and Dogecoin are a few of the most widely used cryptocurrencies. These digital assets are stored, transmitted, and traded through blockchain technology. If you wish to learn more about cryptocurrencies, there are several crypto books that are worth reading.
An important form of digital assets is blockchain platforms. These are the platforms on which most digital assets such as cryptocurrencies are created, and exchanged.
For instance, Ether is the blockchain platform that has built Ethereum, the second most traded cryptocurrency in the world currently.
These are different types of digital tokens that are somewhat related to cryptocurrencies. Common types of digital tokens include utility tokens, security tokens, and hybrid tokens.
The latest sensation in the digital asset world is non-fungible tokens or NFTs. These digital assets represent different types of art in the digital form in a cryptographic way.
Common examples of NFTs include artworks, collectibles, domain names, and virtual reality items.
Digital asset investor: retail and institutional
Both retail and institutional investors are heavily investing in digital assets. However, Cryptocurrencies, stable coins, and NFTs are currently the most desired digital assets for investors.
Institutional investors have shown a recent surge in digital asset investments. The corporate world’s leading names such as Goldman Sachs and Fidelity are investing in digital assets such as Bitcoin. However, others like JP Morgan and Facebook try developing their own digital assets.
With the increased availability of digital asset brokers, exchanges, instruments like Crypto ETFs, and initial coin offerings, retail investors are also investing more in digital assets with each passing day.
Both retail and institutional investors have now perceived digital assets as the futuristic dynamics of the investment world. Therefore in order to keep up with this growing trend, they are increasingly becoming digital asset investors.
There are several ways to invest or trade digital assets for retail and institutional investors.
Investors can directly purchase digital assets from other digital asset investors.
Through digital exchanges
A common way of investing in digital assets is through digital exchanges such as Bitcoin.com or Binance.
Many retail investors invest in cryptocurrency CFDs through online brokers as well. It is a similar way of trading digital assets like spread betting of physical assets. However, there are several disadvantages to trading CFDs.
Direct participation- Initial Coin Offerings (ICO)
An alternative way is to participate in initial coin offerings of newly launched digital assets. The digital offering works with a similar mechanism to the initial public offerings (IPO) of stocks. However, you should also be aware that some of these new coins offered to investors are bound to be rug pulled.