Economy | There are three key reasons why the time to act is now.
Monetary policy space conducive to cryptocurrency success: A higher interest rate environment leads to an inverted yield curve for fixed income instruments, which in turn can lead to negative price pressure and capital flight to higher yielding options.
How higher interest rates affect the market? (Source: Bianco Research)
Inflation is rendering traditional capital preservation tools ineffective, and the market is taking notice. Capital is now in pursuit of higher returns. It's only a matter of time before the behavioral resistance threshold for tokenization is reached.
Inflow of assets into higher yielding instruments. (Source: Bianco Research)
OpenEXA’s OXA Tokens are modeled after a money market fund, making them a smart choice for investors seeking higher returns. As a matter of fact, as interest rates rise, OXA stands to gain even more. Institutional investors can benefit from adding OXA to their portfolio, as it provides an opportunity to earn returns while also exploring the crypto markets for much higher returns.
Policy changes may be slow, but they are moving in the right direction globally. Being able to play the crypto markets now allows investors to capitalize on the potential to make significant profits in this exciting and rapidly evolving sector.
A tight domestic fiscal space is a positive for cryptocurrency. A more favorable global policy trend has been observed.
- The Federal Reserve report on Stablecoins Growth Potential and Impact on Banking. (January 2022)
- The White House Executive Order on Ensuring Responsible Development of Digital Assets. (March 2022)
- The U.S. Department of the Treasury report on The Future of Money and Payments. (September 2022)
OpenEXA stands to benefit from the current fiscal policy landscape. Several key events in 2022 and 2023 demonstrate the growing recognition of the importance of digital assets in financial markets and their potential impact on the economy. These actions suggest that lawmakers are carefully considering the implications of crypto on the financial markets and the broader economy and are likely to formulate regulations in the near future. Once these regulations are in place, they are expected to bring greater clarity and legitimacy to the crypto markets. This will benefit OpenEXA and other compliant players in the crypto space, as it will provide a more stable and predictable regulatory environment for businesses to operate in.
Active funds are rapidly losing market share, posing an existential threat to the relevance of active fund managers on Wall Street. As a result, there is an unprecedented demand for new investment opportunities that can generate alpha and provide superior returns. This demand will drive a shift towards innovative financial products and services that leverage technology to improve investment outcomes and enhance the customer experience.
Bloomberg News on September 11, 2019
“End of Era: Passive Equity Funds Surpass Active in Epic Shift”
- Stock pickers overtaken as investors run toward index funds.
- The balance of power has changed in the stock-fund industry.
Actively managed funds continue to fall (fig 1: Source: FT.COM)
Financial Times on January 24, 2023
“Passive US funds poised to overtake active, ISS says.”
- ISS group forecasts 56% of total US fund assets will be passively managed by 2027.
Actively managed funds continue to fall (fig 1: Source: FT.COM)
Just a quarter-century ago in the 1990s, active funds dominated the market, with over 90% of assets under management. However, today, their market share has declined to less than 50% in some markets, and according to ISS Research, it's projected to drop to 44% overall in the next five years. This downward trend is fueled by outflows and redemptions that are eroding the assets under management of active funds.
Despite this, it's crucial to recognize that active funds play a vital role in setting prices for an efficient market. In fact, without active fund managers, it's impossible to have a truly efficient market. While passive funds are gaining popularity, the need for active funds remains, and these funds are actively seeking new investment opportunities to claw back the lost market share. Some active funds, such as Ark Invest, are integrating more and more newer asset classes like technology and crypto to achieve higher returns.
OpenEXA provides the operational infrastructure for active funds to venture into and explore new investment opportunities in an asset class that is ideal for active fund managers. By partnering with OpenEXA, active funds can benefit from our secure and efficient platform, allowing them to tap into the potential of the crypto markets. Ultimately, the integration of new asset classes will help active funds regain lost ground and attract new investors seeking higher returns.
The bond market is currently experiencing its worst conditions since 1842, and it's expected to persist for some time in the current high-interest rate environment. During a liquidity crunch, many investors may feel pressured to fire sale their bonds in order to meet short-term liquidity needs. However, there is another option: marking bonds to maturity on the book. By doing so, investors can hold onto their bonds until maturity and avoid taking losses from selling them in a volatile market. This approach can help investors navigate the challenging market conditions and avoid making hasty decisions that could result in significant losses.
The Wall Street Journal on May 6, 2022
“It’s the Worst Bond Market Since 1842. That’s the Good News.”
- The four-decade-long bull market in bonds is over, but that doesn’t mean you should dump them.
CNBC on January 7, 2022
“2022 was the worst-ever year for U.S. bonds. How to position your portfolio for 2023.”
- 2022 was the worst year on record for bonds, according to Edward McQuarrie, an investment historian and professor emeritus at Santa Clara University.
- That’s largely due to the Federal Reserve raising interest rates aggressively, which clobbered bond prices, especially those for long-term bonds.
Banks had a $700 billion hole due to bonds losses. (Source: FDIC )
In a distress selling scenario, large mark-to-market losses on asset portfolios can be avoided by converting them into mark-to-maturity assets and issuing AUT collateral tokens. This strategy can be particularly effective during liquidity crunches, which can cause asset prices to plummet and create significant uncertainty in the market. By converting the assets and issuing AUT collateral tokens, institutions can further swap OXA for AUT and Stablecoins for OXA. This approach can help cut losses and weather the storm more effectively, ensuring that institutions are better equipped to manage market volatility and emerge from periods of uncertainty with minimal damage. The Bank Term Funding Program of 2023 serves as an example of this approach.
The time for action is now, when global policy mandates and market trends are favorable.