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Bitcoin’s role in modern finance and the case for active management



June 25, 2024



Bitcoin’s role in modern finance and the case for active management | Image by XBTO

Bitcoin’s role in modern finance and the case for active management | Image by XBTO

TL;DR: XBTO's inaugural FutureFinance event at the Rosewood Hotel Abu Dhabi featured in-depth discussions on Bitcoin's role as the hardest money ever invented and the significant advantages of active management in digital asset markets. Key highlights include Bitcoin's fixed supply and its implications for investment, the unique market structure of digital assets, and advanced investment techniques that leverage high volatility and market inefficiencies. Missed the event?  Watch the full recording here

Last week, we had the pleasure of hosting our inaugural FutureFinance event at the Rosewood Hotel Abu Dhabi. The evening was filled with insightful discussions from leading experts in digital assets and traditional finance. Highlights of the event included a keynote speech by Dr. Saifedean Ammous, author of 'The Bitcoin Standard,' and a presentation by XBTO's Chief Commercial Officer, Javier Rodriguez Alarcon. Here’s a closer look at some of the key takeaways from their engaging presentations.

The case for Bitcoin: Dr. Saifedean Ammous’s perspective

Dr. Saifedean Ammous, renowned economist and author of "The Bitcoin Standard," shared his in-depth analysis of Bitcoin's role in the financial landscape. Drawing from his seminal work, Dr. Ammous began by exploring the fundamental question: what is money?

Money, he explained, is a medium of exchange, distinct from consumer goods and capital goods. It is not consumed for its own sake but used to facilitate trade. Historically, societies have gravitated towards forms of money that are durable, divisible, portable, and, crucially, hard to produce. This principle, he argues, is why gold became the global standard—its low annual supply increase (1.5-2%) made it a stable store of value.

However, modern fiat currencies fail this test due to their high inflation rates, resulting from uncontrolled supply. The best national currencies grow at 7-8% per year, while others, like the Venezuelan Bolivar, experience extreme inflation.

Bitcoin, according to Dr. Ammous, stands out as the hardest money ever invented. Its supply is fixed at 21 million coins, ensuring it cannot be manipulated. This fixed supply, combined with its decentralized nature and difficulty adjustment mechanism, makes Bitcoin a reliable store of value and a superior alternative to fiat currencies. Bitcoin’s value is expected to appreciate over time due to its fixed supply and increasing demand, making it an essential asset for long-term investment.

The case for active management in digital assets

The event also shed light on the critical role of active management in the digital asset space. High volatility in digital assets, often seen as a risk, was presented as an opportunity. Volatility enables strategic trading and the potential to capitalize on price movements, turning it into an advantage rather than a drawback.

Javier Rodriguez Alarcon, XBTO’s Chief Commercial Officer and Head of Asset Management, highlighted the unique market structure of digital assets, characterized by 24/7 trading and diverse venues, which creates a dynamic landscape ideal for active management. By exploiting market inefficiencies and employing quantitative strategies, active managers can generate attractive risk adjusted returns , highlighting the synergy between traditional finance techniques and digital asset markets.

Advanced investment techniques

Sophisticated investment techniques, such as trend-following strategies and risk management practices, were discussed as essential tools for navigating the complexities of digital asset markets. These techniques allow active managers to deliver superior returns while managing potential risks effectively.

Simplifying complexity through outsourcing to an active manager

Rodriguez Alarcon emphasized that the complexity of digital assets can be a barrier for many investors. Active management offers a solution by outsourcing this complexity to experts who can navigate regulatory challenges, cybersecurity concerns, and detailed reporting requirements. This approach allows investors to focus on their core activities while professionals handle the intricacies of digital asset management.

The synergy of hard money and active management

The insights shared by Dr. Ammous and Javier Rodriguez converge on a crucial point: the future of digital assets lies in combining the hard money principles of Bitcoin with the strategic expertise of active management. Bitcoin’s fixed supply and decentralized nature offer a robust store of value, while active management techniques can unlock further potential in this dynamic market.

The intersection of traditional and digital finance

The FutureFinance event highlighted the convergence of traditional and digital finance, showcasing how established investment principles can be successfully applied to digital assets. Understanding the foundational principles of digital assets and integrating advanced investment strategies are crucial for maximizing returns and managing risks in this evolving landscape.

If you missed the event, you can still catch all the valuable insights and discussions. Watch the full recording here and dive deeper into the future of digital asset investment.

We look forward to continuing these conversations and exploring the dynamic world of digital assets with you. Reach out to our experts today to discover how XBTO can assist you.

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