Ever since the concept of value has been created, humans have shown a need to ensure they can touch whatever they own. Whether that is their money, a house, or the tree in their backyard, we need physical contact with our belongings. But we are living in the 21st century now, and the age of digitization is upon us. Do we need to be able to touch something to say we own it?
Is The Era of Traditional Assets Coming To An End?
Things have been turning upside down in the investment world ever since the Brexit hit; that much is certain. With asset management firms locking up user funds so they can’t pull out money, a very dangerous precedent has been created. After all, investors put their hard earned money into these funds, under the assumption of having direct access to money whenever needed. But alas, that is not the case for the majority of funds locked up UK asset management firms right now.
Interestingly enough, the contract signed by every single one of these investors makes a mention of how “fund managers can halt redemptions” at any moment. Do keep in mind this will only occur when extraordinary circumstances occur, and the Brexit could fall into that category. To be more precise, the fund managers determine what these extraordinary situations are, so investors are out of luck regardless of their opinion.
This is another prime example of how centralized control and relying on third parties to safeguard funds is becoming a thing of the past. Physical assets can be freely controlled by investors, which emboldens the claims of ‘if I can touch it, I own it”.In this day and age of diversification, there are other ways to own an asset even without touching it, though.
Don’t be mistaken in thinking all of the [non-]tangible assets make for a good investment either, though. Safe deposit boxes are still owned by a bank, and governments may require users to register the content of these boxes at any given time. Storing cash is a significant security risk as well, for obvious reasons. Precious metals are a viable diversification tool, but it can be difficult to obtain and liquidate bulk at favorable prices.
Can’t Touch My Bitcoin But I Own It Regardless
Smart investors, of which there are more than people may assume, are looking towards new assets. Regardless of whether they are tangible or not, there are assets which allow users to claim ownership. Bitcoin is an excellent example in this regard, as it can’t be touched since there is no physical form by definition. But that does not mean the user holding the funds in a wallet does not own the coins.
By creating a Bitcoin wallet address, the user also generates a unique private key that belongs to them alone. That is assuming they do not use an exchange or other online wallet services to store funds. Installing software on a computer or mobile device is the best way to keep this private key safe. Through this code, the user controls and owns the funds stored in that bitcoin wallet address. It’s not tangible, but it is a value that can be spent or transferred in seconds to anyone else in the world. In fact, Bitcoin is the new asset class of the 21st century.
Source: Sprott Money
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