Looking ahead to next year, major highlights will likely include the growth of the crypto industry, which is anticipated to be strong around metaverse gaming built on blockchains, the growth of Coinbase Global as a potential “super app” for a variety of services, and the concern of regulations that might come regarding crypto assets, reports Barron’s.
Blockchain-based gaming within the metaverse is anticipated to be one of the biggest areas of growth in the next year, believes BTIG’s Mark Palmer. Because of the decentralized structure of blockchain, metaverse gaming could allow for participants to use a variety of tokens and NFTs across the virtual landscapes created within the space.
Meta Platforms (FB) is pivoting to focus on creating a metaverse space that is centralized, but other decentralized options are also growing rapidly, with many companies within the space currently working to create the software that would allow for digital asset exchange between different blockchains. The metaverse is anticipated to create a whole new type of e-commerce that will be cross-transacting in a huge variety of digital assets and tokens, with some game-focused platforms such as Decentraland already experiencing rapid growth.
Coinbase Global could grow to become a “super app,” Palmer believes, as it is working to develop a specific NFT marketplace and is a major custodian and lender of digital assets. Coinbase currently makes the majority of its revenue from cryptocurrency trading from major tokens like bitcoin and ether, but it is anticipating diversifying the revenue base going forward.
“COIN’s planned NFT marketplace is only one part of what we view as an ongoing diversification effort,” said Palmer.
The looming potential of regulatory crackdown from the SEC has many potential investors hesitating, and it’s an unknown that will continue to hang over the space going into next year. So far, the Treasury Department has indicated that issuers of stablecoins should be regulated as banks, and the SEC’s Gary Gensler has indicated that some cryptos should be treated and regulated as securities.
Investing in the Future of Crypto With SATO
The Invesco Alerian Galaxy Crypto Economy ETF (SATO) invests across the crypto industry in a variety of crypto-related categories that are hiring to accommodate the rapid growth they are experiencing. The fund invests across all market caps and within developed and emerging markets.
The fund seeks to track the Alerian Galaxy Global Cryptocurrency-Focused Blockchain Equity, Trusts and ETPs Index, an index that is divided into two different security types: digital asset companies that are engaged in cryptocurrency or the mining, buying, and enabling technologies of cryptocurrency; and exchange traded products (ETPs) and private investment trusts traded over-the-counter that are associated with cryptocurrency.
To be considered for the index, a company must have a minimum full market cap of $50 million, a minimum float-adjusted market cap of $10 million, a minimum free-float factor of 20%, a minimum average daily trading value of $1 million over the last three months, and it must also be listed on a global exchange. This portion of the index is given an 85% weighting.
ETPs and private investment trusts must have a minimum market cap of $1 billion (or $500 million for current constituents), a minimum average daily trading value of $15 million over the last three months, and an open structure to be considered for the index. This portion of the index is given a 15% weighting.
SATO does not invest directly in bitcoin, cryptocurrencies or crypto assets, or in initial coin offerings or futures contracts for cryptocurrencies, and it is non-diversified. The fund may gain exposure to securities within the ETP and Trust component indirectly through a Cayman Islands subsidiary. The subsidiary is wholly owned and advised by Invesco and may constitute no more than 25% of the fund.
Galaxy Digital Holdings (GLXY) is a crypto-investment and bitcoin mining firm that allows for exposure to the growth of gaming within the metaverse and is carried at a 2.42% weight. Voyager Digital Ltd (VOYG) is another crypto brokerage that operates within the same spaces as Galaxy Digital and is carried at a 2.81% weight.
SATO carries an expense ratio of 0.60% and currently has 43 holdings, including Coinbase (COIN) at 3.11%.
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