Signposting Digital Asset Adoption
Six indicators that signal the direction of digital asset adoption.
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Signposting Digital Asset Adoption
As the digital asset industry continues to attract the attention of the world’s largest financial institutions, certain market trends can act as valuable indicators of the potential rate at which digital assets may be adopted in the future. Firms should analyse these trends to guide their strategic decisions regarding investments in digital asset capabilities.
In recent years, whether it’s been the volatile growth in the market capitalisation of cryptocurrencies or the allure of blockchain technologies' ability to increase the efficiency of existing operations, the broad topic of Digital Assets has likely crossed the desks of many in the financial services sector. For decision-makers, the ‘Digital Assets’ space can be an elusive industry to navigate, evaluating whether it presents a promising opportunity, or a Pandora's box that lacks a solid foundational business case is the first challenge to overcome.
Many traditional finance firms have overlooked digital assets, missing out on prior growth opportunities, notably the 2021 digital asset bull run, due to their inability to serve this market effectively. However, despite the market's recent stagnation, we are now witnessing an accelerated interest amongst major financial institutions in exploring digital assets. This surge in interest underscores the reluctance of forward-thinking industry leaders to miss out on potential future growth phases. Traditional financial services firms risk falling behind their competitors and forgoing the potential rewards of digital assets if they neglect to assess how the developments in this space align with their strategic objectives.
When exploring digital asset opportunities, it is paramount that a firm understands the specificities of the technology in question, its technical properties and implementation considerations, its regulatory considerations, and the underlying business case. While we acknowledge the importance of using precise language [Don’t Call Me ‘Crypto’] and recognise that the term 'Digital assets' encompasses a vast range of technologies and products, a common thread unites all potential Digital Asset use cases for financial services companies - the need for confidence surrounding return on investment.
Unlike typical technological changes, the business case for investing in 'digital assets' is frequently built on the expectation of increasing adoption rates, especially given the relatively nascent stage of these technologies. A firm’s forecast of future adoption significantly influences its confidence when considering investments in Digital Asset opportunities. Therefore, the ability to forecast adoption is a crucial factor that informs investment decisions for both companies native to the cryptocurrency space and traditional financial services companies interested in investing in digital asset capabilities.
Forecasting is very difficult, especially about the future. Nonetheless, certain market trends can act as useful indicators of the potential future adoption rate of digital assets. Firms should analyse these trends to guide their strategic decisions regarding investments in digital assets.
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