One of the most exciting use cases for blockchain technology is commonly referred to as Real World Assets, or RWA. Based on a report from Boston Consulting Group, the on-chain RWA market is expected to reach between $4 trillion and $16 trillion by 2030.
We spend so much time talking about the value of crypto assets like bitcoin and ETH, especially when it applies to financial advisors, but RWA can drive trillions of dollars in adoption, is touted by some of the biggest names in finance (JP Morgan, Citi, Boston Consulting Group, Blackstone) and will be extremely important for advisors to understand.
Real World Asset tokens are simply representations of assets that are not necessarily blockchain-native, and are NOT volatile assets like we think of in crypto. These RWA tokens, like all cryptographic tokens, are programmable, so we can encode lockup periods and accredited investor requirements.
Cryptocurrencies are often considered to be volatile and trading them can sometimes be risky. The crypto market has also been known to experience price swings, and like every other investment, there is the chance your investment may sink in value, irrespective of how sure-shot things may seem. That said, risk management is undoubtedly one of the most important aspects of investing in cryptocurrencies.
Here are five ways to manage crypto risk.
1. Only invest what you can afford to lose
As with any investment, you should never invest more than you can afford to lose. This rule applies to all markets and even more so to cryptocurrencies, which can experience double-digit losses in a span of hours.
There’s no doubt that cryptocurrencies have turned several early investors into millionaires. But at the other end of the spectrum, they have left a number of novice investors in financial peril. Apart from the fact that these assets can quickly lose their value in response to ever-changing government policies, crypto trading platforms can fall victim to a hack or shutdown operations.
Crypto assets should be treated as securities by default, and the autonomous organizations that govern decentralized finance (DeFi) should be granted legal status, according to the study.
FTX’s Sam Bankman-Fried had been crypto’s favorite kid until CoinDesk revealed he was actually an enfant terrible.
Disclaimer: The information contained in this newsletter, and any information linked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. You should seek additional information regarding the merits and risks of investing in any cryptocurrency or digital assets.
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