The promises to be fulfilled by blockchain technology and cryptocurrencies will achieve historical significance that will match – or surpass – the internet revolution, according to Julius Baer’s chief investment officer Yves Bonzon.
«The rise of the defi protocols is nothing short of amazing,» said Julius Baer’s Yves Bonzon in a virtual briefing last Friday.
Although there are still ways to go for the nascent technology – such as connecting smart contracts with real-world information like physical verification of traded goods – Bonzon believes that decentralized finance will end up in history as a major game changer.
«In my opinion, this ability to digitize trust is a revolution of a magnitude that is at least as important as the internet revolution was for information sharing,» he described.
Bitcoin: Digital Gold
On bitcoin, Bonzon noted existing shortcomings, such as limited application or storage issues, but lauded its potential for long-term store of value.
«I would expect over time, probably, bitcoin will settle as the digital version of gold especially for a generation of investors who were born with it,» he said.
Government Control
Nonetheless, government intervention in the unchartered area will continue to challenge cryptocurrencies which already face «a very, very volatile equilibrium price-finding process».
«Of course, having a significant degree of control in the financial system is absolutely strategic for government,» Bonzon explained.
«By the way, it’s ironic, that bitcoin was born right at the moment when banking secrecy for tax optimization purposes passed away. The coincidence is quite intriguing.»
Gold: Bad Inflation Hedge
In contrast, Bonzon called precious metals a poor investment as a safe haven against macro risks such as inflation.
«I always consider gold as a very poor inflation hedge,» he explained. «Why? Because history has shown us that in times when you really need gold as an inflation hedge, governments have a tendency to confiscate it.»
Overall for investors, Julius Baer expects the global economy to embark on a solid post-Covid recovery path with inflationary pressures only being transitory and primarily limited to the U.S. The bank advises to stay invested with a focus on short duration, high quality fixed income assets alongside defensive and high-growth equities.
