Crypto as a Financial Asset: A New Asset Class
In the previous lesson, we explored what cryptocurrencies are and how they differ from traditional currencies.
While crypto can be used as a form of digital money to buy goods and services, that's not its main use. More often, cryptocurrencies are treated like financial assets—something people trade or invest in, hoping to profit.
Is Crypto Really a Financial Asset?
There's still debate in the traditional finance world (or "TradFi") over whether cryptocurrencies should even qualify as financial assets.
One common argument against it is that crypto is hard to value. Unlike stocks, crypto doesn't generate earnings or pay dividends. But this isn't unique—gold and other commodities face the same challenge.
Personally, I view cryptocurrencies as financial assets. In fact, I'd go further: crypto is an entirely new asset class—albeit a highly speculative one (for now).
Even Jerome Powell, Chair of the U.S. Federal Reserve, has acknowledged this. He said, "People use bitcoin as a speculative asset. It's just like gold, only it's virtual, it's digital."
In some regions, Bitcoin is even starting to serve as a portable, neutral reserve asset—especially where local currencies are unstable or unreliable.
What's an Asset Class?
An asset class is a group of investments that share similar characteristics and behave in similar ways. Examples include:
- Stocks
- Bonds
- Real estate
- Commodities (like gold or oil)
- Cash (like fiat currencies)
And now...Crypto!
Crypto is the first truly new asset class to emerge in decades.
More Than Just a Payment Method
While cryptocurrencies can be used for payments (e.g., buying a meal), that's not their primary use. Most people either speculate on short-term price movements or hold crypto as a long-term investment, hoping its value will increase.
Just like the forex market allows trading of traditional currencies, the crypto market allows the trading of digital ones. But unlike forex, which operates 24 hours a day, 5.5 days a week, the crypto market never closes—it's open 24/7.
- Traders bet on price changes over minutes or hours.
- Investors hold for months or years, betting on wider adoption and rising value.
Many crypto investors also use strategies to earn passive income from their holdings—further reinforcing its role as a financial asset.
That's why you'll often hear terms like digital assets, cryptoassets, or crypto assets—they all refer to cryptocurrencies used for investment or trading.
Examples of Cryptocurrencies
The first—and still largest—cryptocurrency is Bitcoin. Others include:
- Ether (ETH)
- XRP
- Cardano (ADA)
- Solana (SOL)
- Dogecoin (DOGE)
- Polkadot (DOT)
- Litecoin (LTC)
- Cosmos (ATOM)
Some of these are similar to Bitcoin, while others are based on completely different technologies with unique use cases or features.
In fact, the word "cryptocurrency" can be misleading. Most crypto tokens don't actually function as currencies in the traditional sense.
There are now thousands of cryptocurrencies, each aiming to improve upon earlier versions or offer new capabilities. But not all are created equal.
Beware the Hype
Unfortunately, many cryptos are useless, and some are outright scams.
Yet people still buy them—often because of flashy marketing or wild promises like, "This coin will not just change the world, it'll change the galaxy!"
So along comes a shiny new scam coin like "Galaticoin." The hype kicks in. A new investor thinks, "I HAVE TO get in before it's too late!" They buy in—without doing any research or understanding the tech—and end up holding a worthless token.
They were just another victim of FOMO (Fear of Missing Out).
Don't Be a One-Legged Deer
Some people enter the crypto space with unrealistic expectations—thinking it's a guaranteed way to make money fast.