“The irresistible rise of digital assets – how consumer demand is driving crypto”

By Manuel Silva Martinez, General Partner at Mouro Capital

Like every other groundbreaking idea in fintech, the public’s enthusiastic embrace of digital assets has been a classic question of the chicken and the egg. What came first, new technology or customer demand for it?

The answer is probably a bit of both. Customer habits have definitely front-run a number of the innovations that we see in the market. The secularity of the biggest trend of all — the ‘digitisation of everything’ — has created a level of comfort in the digital sphere that crosses borders, generations, social status and industries, and has almost rendered the physical world a thing of the past. It certainly sets the basis for any new innovation, including further adoption of digital assets.

Specifically, a few more recent customer behaviours underpin why digital assets are now everywhere. In the low interest rate environment of the late 2010s and early ‘20s, customers were looking for yield on their hard-earned cash. Covid only propelled that to new heights with a combination of additional cash (nowhere to spend it) and extra time (nowhere to go) on consumers’ hands. Who would have thought boredom would be digital assets’ best ally?

Trading in crypto became a social movement overnight, fostered by a sense of fast cash. Mainly cryptocurrency, but other cryptoassets too, quickly became normalised as part of the standard financial toolkit. As crypto companies became mainstream brands, sponsoring football teams and even making it onto Saturday Night Live, they have built customer confidence in response to their investment needs.

The same has applied to more complex or higher ticket transactions. For example, in the property space, where we have seen an increase in demand for fractional property assets: a resurgence of shared ownership without the hassle of dealing with brokers or your co-owners. Interestingly enough, a number of these fractional technologies are not strictly crypto, but they aredigital and certainly represent assets in the digital world. This goes to show that digital assets are more than just Bitcoin — much more — fuelled by new and renewed customer demands that show no signs of letting up any time soon.

Conversely, the evolution and further sophistication of Distributed Ledger Technologies (the science behind digital assets), has also triggered needs that the customer didn’t even know they had. Non-Fungible Tokens, or NFTs, are probably the best example, at least in the current hype. Some may see it as version 2.0 of the early speculation that surrounded Bitcoin a few years ago, but it goes beyond that, tying qualitative features to the quantitative, speculative nature of the first wave of digital assets.

NFTs are redefining how customers relate to brands, how they consume experiences and interact with art and, as the metaverse evolves and continues to blur the boundaries between the physical and digital world, they will set new standards for individualism in a digital age, tying emotions with code. In turn, this will unlock new economies that are currently inefficient, such as a new creator economy where digital assets infrastructure will perfect value attribution to digital and offline creators alike, and hopefully boost creation of independent experiences in a sort of digital New Age.

There is a lot to look forward to in what a hybrid metaverse/physical world can bring in terms of new customer experiences and new economic sectors unfolding. There are also many challenges but, for the moment, let’s allow the excitement of a new world to prevail.

This new paradigm is undoubtedly here to stay and is shaking up the foundation of traditional industries. Big brands all want to play in the metaverse, something we saw with Second Life back in 2003, but now in a more digital-ready world. Banks are struggling to address their customers’ demands for crypto without breaking any regulatory red lines. Even central banks and governments are experimenting with stablecoins and government-backed offerings, as they see how digital assets create a separate economy where the traditional power of regulation is largely ineffective. Many challenges remain as digital assets eat up parts of the incumbent economy but, based on current trends, we’ve passed the point of no return.

About Author:

Manuel Silva Martínez – Mouro Capital’s General Partner, authorised by the FCA, he oversees strategy, investor relations, resources, and processes, focused mainly on the UK, Europe, and Latin America