RESEARCH WHITE PAPER BY
CHRIS BURNISKE, BLOCKCHAIN ANALYST AND PRODUCTS LEAD | ARK INVEST
ADAM WHITE, VICE PRESIDENT OF BUSINESS DEVELOPMENT & STRATEGY | COINBASE

ARK Invest and Coinbase explore the merit of bitcoin as the first of its kind in a new asset class — cryptocurrency — distinct from all other asset classes. Universally, we think traditional asset classes must meet the requirement of investability. However, traditional asset classes then differ in their politico-economic features, correlation of price movements, and risk-reward profiles. In this paper, all four criteria are explored in the context of the major asset classes.

Bitcoin exhibits characteristics of a unique asset class—meeting the bar of investability, and differing substantially from other assets in terms of its politico-economic profile, price independence, and risk-reward characteristics. Because our analysis encompasses only five years, it will be important for the community to continue to monitor its behavior in the context of the broader markets.

As Bitcoin’s open-source software evolves, bitcoin will differentiate itself further from other asset classes. Recent innovations like segregated witness46 promise to catalyze bitcoin’s more innovative use cases. Smart contracts and sidechains, for example, could enable entirely new financial services like liquid private markets and truly peer-to-peer loan issuance.

ARK and Coinbase believe bitcoin is the first of its kind in what is rapidly becoming a distinct asset class. Since cryptocurrencies are subject to the strong network effects of users and developers, they may submit to a “winner takes most” model unlike bonds and equities. The cryptocurrencies that successfully foster the flywheel of user and developer engagement could grow to formidable market capitalizations. In a world where the trend is clearly offline to online, why should financial assets be excused from the transformation?

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