Decoding Blockchain and Cryptocurrency

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Decoding Blockchain and Cryptocurrency

• Cryptocurrencies such as Bitcoin have garnered
  significant attention due to their astronomical
  2017 returns and the lack of consensus on their
  true value among prominent market strategists.
  While Athena Capital classifies cryptocurrencies
  as speculative assets with a high degree of
  volatility, we continue to evaluate this evolving
  market and the implications of its underlying
  technology, blockchain.
•  
• Blockchain Revolution
• Blockchain is a digital revolution that we
  believe could have a significant impact on
  society over time. Blockchain is a distributed
  ledger of peer-to-peer transactions that allows
  for secure record storage. It forms the technical
  backbone for cryptocurrencies, such as Bitcoin,
  but also has broad application as a ledger of
  various records and contracts. The result is
  increased transparency, higher security, and
  lower costs. Accenture estimates that large banks
  could save 10 billion by using blockchain to
  improve the speed and efficiency of clearing and
  settlementi.

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Source FactSet, Athena analysis
In our opinion, Blockchain has the potential to
disrupt many industries including finance,
shipping, healthcare, government, auto, and fine
art. For example, Walmart is using blockchain to
track its supply chain to improve food safety in
Chinaii and Maersk is using blockchain to
digitize and simplify the paperwork of its
millions of shipping containersiii. Like the
early days of the internet, it is apparent that
blockchain has significant potential value, but
it will take time for an Amazon-like,
game-changing technology to become readily
apparent in the consumer space.   Cryptocurrency
A Nascent Market The simplest application of
cryptocurrency seeks to facilitate secure and low
cost peer-to-peer transactions without bank
oversight. The long-term outlook for
cryptocurrencies will depend on their potential
applications for users and how they compare to
existing services. Currently, cryptocurrencies
are accepted by few merchants, have low
transaction bandwidth, and can have long
transaction times.
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Cryptocurrencies are currently too nascent and
volatile to provide a credible alternative to
most traditional transactions. They face a number
of challenges to growth, including regulation,
technology issues, scaling, environmental impact,
inflows, and governance, but could eventually
compete with banks, credit cards, and money
transfer companies for part of the global
population. While some market participants have
labeled cryptocurrency a bubble, we believe that
it is premature to do so while the
characteristics and scope of the market have yet
to be established.   Investors who are
well-served by traditional financial services are
unlikely to derive significant utility from the
use of cryptocurrencies, whereas those in
emerging and frontier markets may reap benefits,
especially for unbanked and underbanked
populations, remittance payments, and those in
politically or economically unstable regimes.
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Investment Opportunities There are already over
1,000 cryptocurrencies, many of which have very
small markets. While Bitcoin is the largest, it
has been losing market capitalization to
competitors including Ethereum, Ripple, and
Cardano. Athena Capital classifies
cryptocurrencies as speculative assets with a
high degree of volatility. Investors who choose
to invest in cryptocurrency should
consider   Making a limited allocation
consistent with their risk appetite. Coin
selection is crucial as technologies vary
widely. Diversification may help mitigate
risk. Risks include potential liquidity
challenges, regulatory and tax risk, and
technological risks including hacking. In
terms of implementation, cryptocurrency is
typically purchased online through an exchange
and stored in a wallet. There are a growing
number of exchanges to choose from. If an
investor chooses to make an allocation to
cryptocurrency, Athena Capital suggests
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  Choosing exchanges that are licensed and
regulated by their countries of domicile. Using a
cold wallet via non-internet connected hardware
such as a USB drive. Considering cryptocurrency
funds if clients seek to access more esoteric
coins, as many exchanges that support those coins
are not currently accepting new
customers.   Please refer to our landscape review
for additional information on blockchain and
cryptocurrencies, including an evaluation of
available exchanges and wallets.   i
https//www.ft.com/content/615b3bd8-97a9-11e7-a652
-cde3f882dd7b ii https//www-03.ibm.com/press/us
/en/pressrelease/53487.wss iii
https//www.reuters.com/article/us-usa-blockchain-
ibm/ibm-maersk-in-blockchain-tie-up-for-shipping-i
ndustry-idUSKBN16D26Q   Article Resource -
https//www.athenacapital.com/blog/decoding-blockc
hain-and-cryptocurrency/