Digital Assets and Tokenization

TRENDS WATCH

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.

This week, Elana talks with Bill Taylor, Chief Investment Officer, Fintek Capital Digital Assets Fund.

What is your outlook for crypto?

I truly believe the long-term outlook for crypto (or better stated, digital assets and tokenization) is enormous, since the asset class is still in its infancy. The crypto “world” is just ten years old. Only a few years ago, no one even knew what the blockchain was. Major institutions are gearing up to provide custody of digital assets, exchanges are providing better transparency and liquidity and global acceptance is increasing literally on a daily basis. Regulators are drafting laws (not so much in the U.S., but globally) so that institutions will know what the “rules of engagement” are for crypto and can get involved with a degree of certainty. The upside to crypto has yet to be seen. I like to tell people that the first airplane wasn’t a jet.

What is your outlook for the economy?

I believe we may be in for a very troubling year (or worse) for the economy and not just in the U.S. but globally as well. It has been ten years since the “Great Recession” and many have forgotten what steps were taken to avert a deeper economic collapse – unheard of zero-to-negative interest rates, central banks ballooning their balance sheets and ongoing QEs (1, 2, etc.) permeated global financial markets. It was assumed that WHEN the economy turned around, all of the “unwinding” would go smoothly and as planned. I don’t believe that is going to be the case.

Now after ten years of steady growth, exit strategies are not looking as easy as was first envisioned. The “normalization” of interest rates, the unwinding of central banks’ balance sheets and the enormous amount of global debt is going to create unforeseen and unpleasant problems for the economy. Traders will agree that it’s easy to get INTO positions, but hard (and often painful) to get out.

What keeps you up at night?

Well, this is an interesting question. With our fund being positioned defensively by investing in digital gold and the most liquid digital currencies, I do wake up some nights worrying that everything mentioned above goes perfectly and the global financial markets suffer no problems. I may be one of a small group that gets nervous about good news, and while in one way, I’d like to see that, I don’t believe that will be the case – hence the fund’s positioning. I do also worry about cyber attacks on financial markets and institutions. I also get “night sweats” thinking that I’ve correctly predicted financial chaos and our fund’s performance has exceeded expectations because of our strategy; but the grid then collapses and nobody has access to their funds.