Digital assets: prices, allocation and regulations 2025. Edited by Reena Aggarwal and Paolo Tasca. Cambridge University Press. www.cambridge.org
Digital assets supplies an extensive series of provocative articles in a compact format. From presenting methods for valuing assets and demonstrating the impact of their recording on portfolio performance to dealing with rapidly evolving regulations of crypto -activa, it is full of new and sometimes complex concepts that start with a simple demand: are digital assets of the bubbling of the bubble?
A reader like me, a traditional fundamental analyst, then investigates: are digital assets, such as cryptocurrencies, real investment assets? How is their value determined? Is Blockchain an investment or just an aid to facilitate faster, complex digital accounting? This volume inspires institutional investors to evaluate the risks and rewards in connection with investing in digital assets and the suitability of such investments in portfolios for themselves.
The editors selected wisely specialists in important areas of interest, including the definition and evaluation of digital assets, determining their suitability as institutional investments, revising regulations and compliance and tackling monetary policy and digital currency of the central bank (CBDCs). They also presented a handy reference for dozens of digital asset-related acronyms.
The conclusions and long bibliographies that are included in each chapter serve to strengthen and build on conceptual understanding. There is a “voice” linked to each chapter, to the point at which you want to read more of the work of selected contributors. Every reader will remain hanging more in some sections than others, based on their interest in the topics.
The first chapter, “Institutionalization of digital assets”, offers an extensive overview of the composition of digital assets. The largest is Bitcoin, which represents 75% of the total market capitalization from writing the chapter. Bitcoin is just a subset of the cryptocurrency activity class that uses coding to carry out monetary transactions instead of a bank or third party.
The Chicago Mercantile Exchange (CME) successfully introduced regulated Bitcoin -Futures contracts in 2017 and now counts as the world’s largest location for USD Bitcoin transactions. There are also Digital Asset Exchange Trade Funds (ETFs), both physically based and based on futures. The most important deterrents for widespread institutionalization are related to inefficiencies regarding valuation, volatility, regulatory clarity and the introduction of preservators and Prime brokers. Moreover, most cryptocurrency trade is performed on non -regulated stock exchanges. These care points are tackled through the following chapters in the book. On the positive side, the low correlation of cryptocurrency with the most investable activa classes can be a strong argument for the as diversification in portfolios.
“How and when are cryptocurrency predictable?” This application, the focus of Chapter 2, comes from the back testing of the economic value of the portfolio that is attributed to cryptocurrency. Spoiler alert: With the evidence that is presented in this section, readers will understand why cryptocurrencies show large monthly average returns, but also massive volatility. The authors have used cryptocurrency-specific factors in their predictive exercises. They conclude that Bitcoin can contribute to the diversification of portfolios on the basis of their evidence, but “will need further research before Bitcoin or another digital associated digital currency calls a new activa class.” (p. 40)
How do you appreciate a digitally active one? With the help of a valid methodology presented in Chapter 3, “Defi versus Tradfi: Valuation with the help of multiples and reduced cash flows”, the authors apply conventional valuation analysis -comparisons on Defi (decentralized finances) tokens and offer a comparison with the appreciation of stock market shares. The methodology seems fairly simple, but is actually extremely complex, with different components of the cryptocurrency ecosystem. The authors analyze decentralized exchanges (DEXS), protocols for loanable funds (PLFs) and yields (yield farmers and lubricity of line workers, seen as returnmaximalisers), which are compared with exchanges, banks and asset managers, respectively. Another spoiler alert: The authors conclude that Defi -Tokens are too expensive compared to the equity of financial service providers.
‘Regulations and compliance with digital assets’, part III of Digital assetsMust be mandatory for supervisors, bankers and asset managers worldwide. This large part is written so well and is presented that it serves as a compliance and legal blueprint for digital assets. Issues that are tackled in front of the foreground and are tackled directly in this section, include KYC (know your customer), AML (anti-Witwas), financing of terrorism, security risk, tax evasion, transparency and guardianship. The total picture calls for global rather than fragmented regulations, especially because cryptoassets run on the internet, which has no national boundaries.
Space in this review for criticisms of individual chapters is limited, but a last one must be emphasized: “Monetary policy in a world with cryptocurrencies, stablecoins and Central Banks Digital Currency (CBDC),” Chapter 10. How can digital currencies influence the monetary policy of monetary policy? In general, the balance of the central bank would not change. Even if new forms of money and new currencies are introduced, the central bank loses its ability to control short -term interest rate and not implement the monetary policy. If, in the case of the American Federal Reserve, a strange currency is ‘dollarized’, as in a stablecoin, monetary policy would lose its influence. The author argues for regulations comparable to those at existing banks and financial market infrastructures to prevent runs at Stablecoin -emission.
There are little criticism to submit against this excellent book. Due to no fault of the authors, the articles are already a bit outdated, due to the long lead time that is needed to produce a reference work of this quality. The newest data used up to 2022. The ecosystem of digital assets is constantly changing, if not transforming, so something that someone writes will be immediately outdated. Yet the concepts are presented in Digital assets remain intact.
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