The current financial system is on the verge of major changes. We believe that cryptocurrencies will play an important role in this shift. Decentralizing traditional processes provides opportunities for improved infrastructure, efficiency and equal opportunities. Together with the potential growth, this creates an interesting risk-return ratio for investors.
Since the Financial Crisis of 2008, we have seen a sharp decline in trust in the current monetary system. However, the first cracks in this system are not from recent years; they date back to the 1970s. Since the abandonment of the gold standard, it has been possible for governments to create additional money without being backed by a reserve. The consequences of this are becoming increasingly visible: inflation is rising and a growing proportion of the population is becoming aware that this cannot continue indefinitely.
Bitcoin was developed as a decentralized digital currency in response to this issue. Due to decentralization, there is no central authority and important key factors such as inflation are predetermined. Since Bitcoin's success, the market has evolved greatly, for example, there are now over 20.000 different cryptocurrencies, each with its own purpose. Despite its exponential growth over the past few decades, the market is still relatively young and small, which makes it an interesting asset class for investors. Learn more about investing in digital assets in our Investor’s Guide.
Cryptocurrency and ESG
We are convinced that the opportunities created by cryptocurrencies have the power to improve equality around the world. Our current financial system relies on central authorities such as governments and banks, which can interfere with transactions, freeze accounts or even deny overall access.
Our current system is prone to human error. By decentralizing and automating these financial and banking procedures, the role of an intermediary becomes redundant which may result in fair and equal opportunities for all.
In a decentralized economy, everyone can participate regardless of origin, gender or religion.
Sustainability and environmental topics are becoming increasingly important aspects. We also experience this as a counter-argument to investing in digital assets. While we acknowledge Bitcoin's current energy use, we believe that Bitcoin's benefits outweigh it. Whereas it is true that Bitcoin relies on computing power in order to operate, this does not apply to 99% of all cryptocurrencies.
Despite the fact that Bitcoin's energy consumption will remain high, we believe that these processes will improve in the future. The energy consumption will become more efficient and, in particular, the energy source will be improved. For example, greenhouses in the Netherlands are already being heated with the heat from Bitcoin mining, and several oil companies are converting their waste into surplus energy to mine Bitcoin.
It is now estimated that about 40-75% of the energy consumed by the Bitcoin network is already extracted from renewable energy.
At Hodl, we want to invest in a future where everyone can participate in an open and transparent financial network. Over the past few months, we have seen adoption accelerate and we are convinced that this adoption will continue to increase. Especially in countries where the current monetary system has failed its civilians for generations.
We also expect an increase in operational efficiency across the various cryptocurrencies. For example, Bitcoin has seen a steady increase in the number of miners switching to renewable energy, and Ethereum has switched to more energy-efficient technology. Whereas one computer used to fill an entire room during the rise of the Internet, this later became many times more efficient.
We believe that cryptocurrencies can be used to create a superior financial system that will have a global impact at all levels of society, regardless of religion, class or gender.