Expect to see a lot more of the Dfinity logo

Source: Dfinity.org

Other blockchains, such as Bitcoin or Ethereum, rely on cloud-based computing services from technology bemouths such as Amazon, Google, IBM, Microsoft, Oracle etc. Dfinity will use a global network of data centres in France, Japan, Burkina Faso and Jamaica as it looks to break the strangle hold that a handful of big tech firms have on the internet, and potentially on Blockchain technology. Dfinity uses smart contracts and is following several other Blockchain firms, such as Binance smart chain, Cardano, Polkadot and Stratis now challenging Ethereum (which, due to its popularity, has become slow and expensive on which to carry out transactions).

In conversations Digital Bytes has with people from all over the world (who are typically over 35 and have business experience outside of crypto and the blockchain sector), a constant question arises: “How can some of these crypto businesses be worth so much?”, equally bemoaning: “I don’t understand how these cryptos attract the valuations that they do!” What we are seeing is the creation of a whole new infrastructure and way of doing business. Organisations such as Bitcoin, Cardano and Dfinity have been established as foundations and, instead of offering shares, they have issued tokens whereby enabling the buyers of such tokens to use their blockchain/services. The buyers believe that these foundations’ services offer tremendous growth opportunities and will become so popular that the value of the token prices will appreciate as they attract new buyers and users. It is not profitability that is driving the token price but faith that a limited number of tokens being issued by these foundations will result in the token price being driven up. 

To old-fashioned investors relying on balance sheets and earnings, they often overlook the fact that, in reality, stock markets are largely driven by sentiment. Indeed, they believe that certain companies’ products and services will be more popular than others in the future. Subsequently, even in the UK FTSE 100 index, we see long-standing, so-called secure and trusted companies, such as IAG (owner of British Airways) and British Telecom have Price Earnings (PE) of 2.68 and British Telecom a PE of 9.24 respectively. Conversely, the software computer services business, AVASAT, has a PE of 2,228 and OCADO a PE of 12,415. However, the one thing that many of the best-known publicly traded equities in the world yearn is the amount of turnover that many cryptos enjoy. In its first few days of trading, even a newcomer such as Dfinity attracted a 24-hour turnover of its tokens i.e., buyers and sellers had traded over $3billion worth of tokens in just a day. Since Dfinity, alongside other cryptos, can be traded globally 24/7/365 (subject to those jurisdictions that ban crypto trading), it would confirm there is no shortage of interest in this fast-growing new asset class. 

Meanwhile, who would have thought that 20 years ago a firm selling books would spawn the richest person in the world, Jeff Bezos? Furthermore, how many of you older readers derided the ‘yuppies’ in the 1980s and 1990s clutching their mobile phones the size of a house brick? Yet the popularity of mobile phones has given birth to the most valuable company in the world, Apple, and is the first firm ever to be valued at over $2 trillion. No doubt, in the same way that Amazon and Apple have grown by executing acquisitions, crypto companies will be looking out for M&A opportunities - presumably using their highly rated equity and tokens to buy companies with proven revenue and customers. Many companies are loss-making and many more survive under piles of debt. Ultimately, for all businesses to survive, they require a means in which to pay their bills and grow, whether that be with cash or a crypto currency that third parties are happy to accept as payment. Probably many crypto firms will fail as, after all, 90% of new starts -ups do not survive. Andy Herriot, CEO at Monsas (a specialist UK regulated firm that offers a range of technology and support services for traditional and digital assets providers), believes: “The sentiment is growth versus value and current achievement, growth must always be priced sensibly and not simply a ‘hope’. The digital market has a lot of ‘hope’ within it, but the seamless, instant and traceable transmission of value would revolutionise global trading and money flows. There are legitimate concerns surrounding the media frenzy and the focus towards retail investors, so investors should be aware.”  

However, surely by having a loyal band of supporters/token holders packed full of belief and positive sentiment this can bolster a crypto currency to ‘ride high’ and bamboozle all those old fashion sceptics ..…..? 

There will be those who believe that higher yields are a precursor to higher inflation and will therefore turn to gold, while others will advocate increasing your exposure to property. There is also a growing band of investors who will wish to increase their crypto currency holds as an alternative non-correlated asset class.

Historically, an adage among stock market traders suggested: “Sell in May, come back St Ledger Day” At the time, it was thought that stockbrokers and wealth investors escaped from the heat of the City of London over the summer and headed off to their country estates, only to return at the end of September for the St. Leger's Stakes - the last of the major horse races on the flat in the British horse racing calendar. According to Investopedia, from 1950 to 2013 the Dow Jones Industrial Average posted lower returns during the May to October period, compared with the November to April period. But caution is required as, since 2013, there have also been some sizable rallies in the same period. Last year, the S&P 500 rose by 16%.

However, it has been disappointing for a few shareholders of Apple to see that, despite a rise in revenue of 54% to $89.6 billion in the last quarter, the share price of Apple is now lower than it was - before it reported these phenomenal results! And remember too, even Apple, with its $91 billion cash pile, joins the other 496 firms in the S&P500 that are not debt free, according to the ‘Retire before dad’ website. The question we all want to have the answer to is, if interest rates are to start edging higher (given the massive increase in corporate and national debt), will cryptos stay firm or even rally in the face of falling equity and bond markets? Maybe this explains why the list of companies and funds investing in cryptos continues to grow since it ensures that they, too, have diversification in the assets they hold.