South Korean Wealth Management Firm Says Cryptos Can Be Safe Haven Asset
In the interview, Jeong stated that the power of cryptocurrencies was their ability to become safe haven assets, thereby minimizing investment risks. Jeong also said that as the cryptocurrency market is still in its infancy, it’s a given that it will be extremely volatile, but also that this could change as the capitalization of these currencies increases and as more business start accepting them as a form of payment.
Jeong went on to say that the adoption of cryptocurrencies will help them reach a certain point of stability, a required feature for businesses to adopt them as a reliable payment method.
As a solution for traders, investors, and merchants who are entering the crypto space, Jeong proposed a system that will let people detect the risk and alter one’s portfolio of cryptocurrencies based on the health of the market. The proposed system would leverage artificial intelligence to balance portfolios of digital assets automatically.
The suggestion to use AI to balance portfolios and make investment recommendations is nothing new and is something that many businesses and startups have failed to implement successfully. For instance, the Decentralized Autonomous Organization was the first project on Ethereum that attempted the idea but failed in many key points along the process.
Other projects attempted to mirror the DAO project their own systems to reduce the risk for cryptocurrency investors, using the same AI market analysis. These projects too failed to captivate the interest of investors and end users. The Numerai project, based on Ethereum, was one such project that tried to implement a decentralized hedge fund – but also failed.
Reducing Risk For Cryptocurrency Traders
Although progress has been slow and disappointing for AI-powered crypto technology, this hasn’t thwarted future attempts. For instance, the billionaire Peter Thiel heavily instead in a startup named Tagomi that helps large-scale investors and mutual funds invest in the cryptocurrency market. In addition to opening the market up to increased liquidity by regular investors, Tagomi also distributes its orders across different OTC markets and exchanges, mirroring the practice of traditional stock markets.
The spread of different position sizes and assets means that investors are apparently protected from the volatility of the cryptocurrency market. Tagomi also employs age-old techniques of investing like dollar cost averaging and risk diversification methods. Additionally, it’s expected that the firm will implement other solutions involving AI and big data to manage risk for its institutional investors, although this expectation has been met with skepticism.
As of now, the blockchain, cryptocurrency, and AI trifecta have yet to see a practical or meaningful implementation in the real world of investing and wealth management. Yet if a company is successful in finding a solution that works, it could lead to the mainstream acceptance of cryptocurrencies and may appeal to public investors who are on the fence about blockchain technology.