The returns from the software industry can point to the potential of cryptoactives to create wealth in the world.
The software industry has created $4.1 trillion in wealth for investors, while the precious metals industry has destroyed $17 billion in wealth. The data are from a study released by researchers Sam Brasser and Steef Bergakker on the merits of investments in trends that transform entire sectors.
According to the study’s conclusion, the software industry gave the most returns between 1929 and 2019 and created wealth among all the sectors studied.
Although cryptoactives were not directly cited in the study, they are a developmental unfolding of the software industry, which has grown significantly over the last 20 years. This growth is a result of the cheapening of memories and computing power; the emergence of the Internet and cryptographic network protocols; and the popularization of mobile and financial operations that take advantage of these developments.
The wealth generation of cryptoactives
The crypto market represents only a small fraction of the traditional financial market, however, its wealth generation since its advent in 2008, demonstrates its potential for appreciation over time. As we can see in the graph below:
Although the market capitalization of cryptoactives has fluctuated with many price fluctuations, this capitalization increased from about $10 billion in 2013 to $237 billion at the end of 2019. The most highly valued period is in 2017, when Bitcoin reached the $20,000 mark and became mainstream, reaching a capitalization of more than $500 billion. The current movement is one of accumulation and increase in volume suggests an increase in capitalization.
The valuation of crypto assets is long-term and is likely to be supported by increased interest in cryptomoeda as an asset class by institutional investors. The average daily trading volume of crypto currencies is only 1% of the foreign exchange market.
The crypto market is still a fraction of the global stock market ($71 trillion at the end of 2019) and the global debt market (more than $100 trillion at the end of 2018), according to Visual Capitalist data.
Investing in software pays off
Also according to the study, investment in trends that have the potential for socio-economic transformation allows for a greater possibility of generating wealth. The fate of industries is influenced by global trends driven by changes in sociodemographic, political and technological data. And cryptoactives, as they are embedded in the software-based economy, have the potential to be one of the greatest wealth generators of this century.
Sociodemographic change is related to slow developments in society, such as ageing. Policy-led changes include new laws, such as banking regulation that followed the financial crisis. Technological change is related to innovations such as those caused by digitalisation that followed the 2008 crisis. Bitcoin was created and launched virtually during the systemic crisis in the US derivatives industry in 2008.
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