Cryptocurrencies are likely in the early stages of a two-decade-long trend of adoption, Daiwa says in a research report.
Blockchain is a revolutionary technology set to up-end global industries, including finance, logistics, healthcare, and manufacturing, and its best-known outgrowth, cryptocurrencies, are set for long-term growth, Japanese investment bank Daiwa Capital Markets said in a 180-page research report Friday.
«If the rate of cryptocurrency adoption continues to follow the adoption of the internet when it first came to prominence, then we could be in the early stages of a 20-year supercycle for blockchain technology, which is likely to have far-reaching effects on various industries,» Daiwa said. «We believe institutional investors can no longer afford to ignore this sector.»
Daiwa highlighted the potential uses of blockchain outside of cryptocurrencies. In logistics and supply chains, Daiwa cited the use of blockchain technology to locate a product's origin and details. As an example, Daiwa cited a collaboration between shipping giant Maersk and IBM which led to the launch of the open platform TradeLens, which has tracked 42 million container shipments using the technology.
Outperforming Traditional Assets
For the technology's best-known use, Daiwa noted that cryptocurrencies, such as Bitcoin, have outperformed many traditional asset classes for the past three years, with the total market capitalization of the top-20 cryptocurrencies reaching around US$2.0 trillion in early April. The investment bank estimated that if cryptocurrencies were an economy, it would be the eighth largest globally by gross domestic product (GDP).
As a second driver, Daiwa noted Russia’s invasion of Ukraine has highlighted the demand for cryptocurrencies as seizure-resistant form of financing.
«Impacted citizens in both countries have relied on cryptocurrency to flee, preserve their savings, and settle daily transactions,» Daiwa said.
Environmental Concerns
On environmental issues, Daiwa did recognize criticism of cryptocurrencies for their heavy consumption of energy and related emissions of carbon. They cited data from the University of Cambridge that showed Bitcoin energy consumption was at around 0.5 percent of electricity consumption globally, and comparable to how much Chile and the Netherlands currently use. Bitcoin’s carbon emissions are around the same as Sri Lanka’s, the report said. But at the same time, much of the energy used is renewable, and will potentially accelerate the adoption of greener electricity sources, Daiwa said. The investment bank added that blockchain technology is playing a significant role in the adoption of green finance, particularly via issuance and tokenization.
When looking for ways to invest in the sector, Daiwa tipped Coinbase Global as its top stock pick for institutional investors to gain indirect exposure to cryptocurrencies, saying it believed the company was the highest-quality exchange. The investment bank also cited small-capitalization stock BC Technology Group, which is the only licensed digital asset service provider in Hong Kong.
