In times of zero interest rates or even penalty interest rates, both private and institutional investors are looking for returns. It is well known that there is nothing left to be gained from current accounts. Entrepreneurs and companies are now also being charged sometimes not inconsiderable fees by their respective institutions for high cash holdings in bank accounts. At the same time, we are threatened by a significant wave of inflation. Raw materials such as wood, metals and building materials such as cement are becoming scarce commodities and their prices are going through the roof. The reason for this is the gigantic economic stimulus programs on both sides of the Atlantic, but also in Asia. The synchronized upturn in demand is leading to a shortage of goods and consequently to sharp price rises. Investors also need to be prepared for this and invest their savings as inflation-proof as possible.

Crypto assets beat all other assets

A look at the performance over the last ten years shows the following picture: investments in bonds gained an average of 0.9% per year, while real wages grew by the same amount over the same period. Gold, the currency of choice when it comes to inflation, has increased in value by 2.4 % per year. Germany's favorite investment, real estate, grew by 6 % per year. The DAX performed even better with an average annual increase of 6.5 %. However, the cryptocurrency Bitcoin stands above all with an annual real return of 156.8 %. Cryptocurrencies currently seem to be the non plus ultra and fabulous profits are being made out of nowhere within a very short space of time. There are always such 'boom and bust' cycles in which asset classes are driven up by euphoric investors. The biggest bubble of all, the tulip mania in the Netherlands, comes to mind. In 1637, it led to the first and biggest stock market crash in world history. The one million dollar question is now once again: is everything different this time?

Crypto - A new asset class?

With the new Smart Crypto Index (ISIN: DE000VQ8SSC7) from Vontobel, investors can now invest in the 20 most important stocks in the crypto sector and the five most important cryptocurrencies worldwide for the first time via an index certificate. The index covers the entire value chain with companies from the sectors of miners, chip designers, exchanges, e-commerce, payment and blockchain platforms, investment and retail banks, brokers, asset managers and custodians.

© Thomas Rappold

The renowned investment bank Goldman Sachs recently titled a study on cryptocurrencies with this question, putting it in a nutshell. Bitcoin, Ether, Litecoin, XRP, the fantasy currency Dogecoin and hundreds of other currencies have a combined market capitalization of around 2 trillion dollars. That's a lot of money that could be used to buy a company like Apple - the most profitable tech company ever. Bitcoin alone has a total value of over one trillion dollars. Fans of Bitcoin see it as one of the few uniform stores of value in the world. It is now the most widely held asset in history outside of the dollar and the euro; 140 million people own Bitcoins. Unlike gold, Bitcoin is easy to store and transport. Stores of value are social constructs: They have value because we believe they do. Bitcoin and other cryptocurrencies are the 'digital gold' of Generation Z and Y. It is not without reason that the CEO of Consorsbank, one of Germany's largest direct brokers, emphasized that one in three of the bank's customers had expressed an interest in crypto trading. In our modern, globalized society, in which a significant proportion of social interaction and commerce takes place online - especially among younger people - it also has to be digital.

Bitcoin is therefore a plausible alternative store of value to gold and is currently the best candidate among cryptocurrencies due to its broader social acceptance with a similar structure. Nourel Roubini, economics professor at the New York Stern School of Business, bestselling author and also known among experts as 'Dr. Doom', takes a very different view. In his opinion, it is wrong to refer to cryptos as currencies: "Currencies must have four characteristics: They must be a unit of account, a means of payment, a stable store of value and a single means of payment. Bitcoin and most other cryptocurrencies have none of these characteristics," says the renowned economist. Nor are they assets. These are characterized either by a cash flow (dividends for companies or interest coupons for bonds) or by a benefit, as is the case with commodities such as oil and copper. After all, gold is also an important raw material for the electronics and jewelry industry.

Cryptocurrencies as a strategic digital infrastructure

The three strongest movements in the crypto ecosystem, namely payments, decentralized finance (DeFi) and the packaging of value into so-called tokens (NFTs), are largely built on Ethereum. This is a type of programmable currency based on the Ethereum blockchain, which software developers can use to write digital applications in the form of smart contracts. Blockchain technology combined with programmable currencies has the potential to permanently change and disrupt global finance as well as the industrial sector. The sale of digital art is just the beginning.

Industry 4.0 context

Thomas Rappold is a technology investment expert, FinTech entrepreneur and international bestselling author.

© Thomas Rappold

Having lost the first half of the digitalization process, Germany must now play to its strengths in the field of industrial software. This requires the automotive and mechanical engineering sectors, both of which are facing major transformation processes in the field of digitalization and are heavily dependent on each other due to their mutual economic relationships, to join forces. Germany is in an excellent starting position when it comes to blockchain and cryptocurrencies: the German government has recognized the importance of blockchain and adopted a concrete roadmap with the aim of exploiting the opportunities offered by blockchain technology and mobilizing its potential for digital transformation.

German industry is also at the forefront of the use of 5G, as the new mobile communications standard, with its ultra-short latency times, offers real-time M2M communication for the first time, which, in combination with blockchain and crypto technology, is ideal for establishing new business models. Like the digital economy, mechanical engineering can also use cryptocurrency to implement new revenue models in the direction of flexible subscription and pay-per-use models.