Is This the Solution to Crypto Portfolio Diversity? Brickblock and Hedging the Risk of Cryptocurrency Volatility

ICO funding is the future of startup financing. A year ago, no one was talking about ICOs but today they are a big factor for venture capitalists. This is due to the strong price run-up of major cryptocurrencies and the overall liquidity of digital currencies. ICOs have compelling advantages for entrepreneurs. The crypto economy is possibly the most volatile economy today. In one month, investors can make 10 times what they invest and in the next month lose it all. Hence the old adage, “don’t put all your eggs in one basket”. Unless you are a market oracle, diversifying your crypto-portfolio is the way to mitigate these risks.

Money has three distinctive properties: a store of value, medium of exchange, and a unit of account. Cryptocurrencies are primarily used as a store of value while using cryptocurrencies as a medium of exchange and a unit of account is still in its early stages. This means that solutions to escaping the volatility of the cryptocurrency market are limited. Investors in traditional equity markets would hedge their bets, casting their investments far and wide across several industries. On the other hand, the only option for cryptocurrency investors is to reconvert into fiat currency.

Brickblock is organizing its ICO on 1st November 2017. The platform is building a new blockchain-based solution for investing in Exchange Traded Funds (ETFs), Real Estate Funds (REFs), passive Coin Traded Funds (CTFs), and active Coin Managed Funds (CMFs). Users will be able to invest through a streamlined process with an effective use of smart contracts and significantly lower costs than traditional investment avenues. Powered by its own denomination and Proof-of-Asset scheme, Brickblock will empower investors to hedge the risk of cryptocurrencies without converting them to fiat currency. By enabling the direct purchase of real-world assets, Brickblock will be offering a simple way to hedge against the crypto-market volatility.

By using blockchain to clear and settle processes, Brickblock will reduce the counterparty risk exposure significantly to less than 1 minute. Using blockchain technology, high degrees of automation and an effective use of smart contracts allows Brickblock to bypass a number of third parties which lowers costs and complexity that would be the case in conventional stock trading. Additionally, the absence on third parties removes the barriers to trade in global ETFs and REFs since there are no geographical borders involved. Moreover, the Brickblock concept paves the way for a crypto basket investment scheme with an elaborate cryptographic audit structure, where auditors are commissioned by the Brickblock team to prevent potential conflicts of interest with fund managers.

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