The digital economy has arrived. Here are three things to keep in mind when exploring investment opportunities.
Posted: May 16, 2022 | Word Count: 961
The digital economy is defined as the intersection of technology and finance. As we continue to use the internet and digital technologies to work, live, and play, we are collectively impacting the “traditional” financial system, and creating a digital-first economy.
As with any new industry, the digital economy presents a compelling and potentially lucrative opportunity for savvy individuals who want to invest at the early stage of the industry’s development. While understanding the most important themes within the digital economy and finding ways to invest can be challenging, here are three things to consider:
1. Crypto is here to stay – and we need to learn about it
Crypto, also known as cryptocurrency or digital assets, means digital currencies that are secured by cryptography. Many cryptocurrencies run on decentralized networks based on blockchain technology, which is a distributed ledger enforced by a network of various computers. Some believe that crypto’s utility for exchanging value with anyone, anywhere, electronically, instantly, and without the need of traditional intermediaries like banks, has the potential to fundamentally reshape the global financial system.
Companies directly involved in crypto mining, payments, finance, and infrastructure use these digital assets and their associated networks as the foundation for a digital economy where technologies that encourage interaction, development, and rapid growth within the financial industry can be built.
2. Technology will continue to connect us and help us live more efficiently
When visiting a store or a restaurant nowadays, there is often an option to pay using the tap of a card or your mobile device, or quickly receive personalized financing options. Small conveniences and efficiencies can add up to save time, money, and stress. Even in just the past five years, technology has transformed the way we think about the world, and even more so how we do business and pay for things.
In the digital economy, companies build upon those innovations using digital asset infrastructure by developing and providing technology that facilitates communication, commerce, and collaboration. These organizations include household names like digital payments processor PayPal*, as well as newer entrants that are having a huge impact in driving the growth of the digital economy, like Coinbase, one of the most popular crypto exchanges.
3. Financial institutions will exist but may look different
You may be familiar with traditional financial institutions like banks, asset managers, exchanges, brokerages, and financial advisors. These days, institutions have technology like online banking and exchanges and apps for accessing your investments and accounts, but built on the same centralized databases and legacy systems.
Institutions in the digital economy use new networks, protocols, and cryptocurrencies to offer a digitally native, cross-border financial experience. With enough duct tape, you might get your car to float, but it’ll never have the maneuverability of a speedboat. Rather than retrofitting old systems, the digital economy represents a ground-up rebuild of the ways we exchange value. Participation in the digital economy by these institutions adds momentum to technology that powers it forward, pioneering the future of finance.
If this is of interest and you find yourself wanting to learn more about potential investments in the digital economy and the future of finance in a user friendly and secure way, you can visit www.grayscale.com/gfof/ for more information on their newest publicly available investment fund, Grayscale® Future of Finance (symbol: GFOF). GFOF is available across the U.S. through any platform where you can buy and sell stocks, for investors who want to invest in the future of the digital economy, easily and securely.
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call (833) 903-2211 or visit our website at www.grayscale.com/GFOF. Read the prospectus or summary prospectus carefully before investing.
Investments involve risk. Principal loss is possible. Unlike mutual funds, ETFs may trade at a premium or discount to their net asset value. The fund is new and has limited operating history to judge.
Fund Risks: Non-diversified, Foreign securities, Emerging markets, Small to mid-capitalization companies.
The Fund will not invest in digital assets directly or through the use of derivatives. The Fund also will not invest in initial coin offerings. The Fund may, however, have indirect exposure to digital assets by virtue of its investments in companies that use one or more digital assets as part of their business activities or that hold digital assets as proprietary investments. Because the Fund will not invest directly in any digital assets, it will not track price movements of any digital assets.
Future of Finance companies rely heavily on the success of the digital currency industry, the development and acceptance of which is subject to a variety of factors that are difficult to evaluate. These companies may be subject to theft, loss or destruction of cryptographic keys (required to access a user’s account when transacting on blockchain). Blockchain technology is new and many of its uses may be untested. The development and acceptance of competing platforms or technologies may cause consumers or investors to use an alternative to blockchains. Digital assets that are represented on a blockchain and trade on a digital asset exchange may not necessarily benefit from viable trading markets. Digital commodities and their associated platforms are largely unregulated, and the regulatory environment is rapidly evolving. Companies that are developing financial technologies that seek to disrupt or displace established financial institutions generally face competition from much larger and more established firms.
“Future of finance” is defined as the intersection of finance, technology and digital assets. GFOF is distributed by Foreside Fund Services, LLC and Grayscale Advisors, LLC is the adviser.
*As of 05/13/2022, 9.84% of GFOF is invested in PayPal.