Markethive: Industries That Blockchain Will Radically Transform Hedge Funds

Tuesday, March 13, 2018

Industries That Blockchain Will Radically Transform Hedge Funds

The term “cryptocurrency” is a misnomer.

A common misconception, held by many newcomers to the blockchain world, is that the technology’s potential lies solely in the banking and financial industry. In fact, the recent suggestion of the Indian government to rename cryptocurrency as “crypto assets”, and Warren’s Buffett’s belief that Bitcoin is not in any way a currency, are perhaps closer to the true nature of cryptocurrency than the commonly held belief that it is simply digital money.

Cryptocurrencies should not be seen as just money, but as tools. Blockchain technology, which underpins cryptocurrency, has potential in many more forms than just as a medium of exchange and store of value.

The application of this technology to industries as varied as supply chain management, fashion and publishing is a result of the innate flexibility of blockchain. The nature of a platform can be programmed to suit a variety of needs. The sooner an investor realizes this, the sooner they will see how exactly it might be applied to different industries, giving them a degree of clarity with can help them measure the potential of a project to disrupt a particular industry.

Given the immense potential of blockchain, we take a look at industries, one at a time, that will be upended by its imminent commercial arrival. The shown here is as folows:

Hedge Funds

Today’s hedge funds assets total at about $3 trillion.

They operate in a wide variety of markets and hold considerable risk and reward. In the current system of hedge funds, a limited number of investors come together to pool in their money. Transaction fees are high, an individual investor may have a different opinion than that of the group, transparency is far from ideal and liquidity is low. It is a lucrative investment avenue that is restricted by issues out of the investors’ control. The cryptocurrency market is also extremely volatile, which is exactly what hedge funds flourish.

These are all issues blockchain can solve. The decentralized nature of blockchain means many more investors can work together and operate on a voting system to place their investments and align their interests. Strategists can provide their analysis, tools and strategies to the market who can then invest in it and earn higher returns. This is what hedge fund focused projects like Alpha Protocol is doing.

Numerai is also utilizing decentralization to incentivize the construction of an AI-backed hedge fund with its token Numeraire. The project’s standout aspect is its emphasis on machine learning and data science (they even host weekly data science tournaments). Stock market data is also accessible on the platform, providing data scientists with crucial data they can use to create high return strategies.

Like the two projects mentioned above, Quantopian is also incentivizing users to write investment algorithms which can operates on a licensing model. Authors of these algorithms will get paid based on performance. They also host competitions and offer capital to the authors of the best algorithms.

Chuck Reynolds

Marketing Dept

Contributor