As an ardent student of the global financial markets, I’ve remained fascinated by how evolving technology is turning the industry on its proverbial head – particularly due to innovations that have come to market in just the past 10 years.

Below is a great infographic published by the World Economic Forum in a 2015 report which illustrates that virtually every sector in the financial services industry is now being disrupted and, in many cases, transformed by fintech.

lyle-hauser-graph

Financial institutions which once relied on relatively static, highly profitable business models now find themselves competing with – and losing market share to – fintech products, services and, indeed, new financial ecosystems, which are collectively redefining the financial landscape.  Some notable examples include peer-to-peer lending; online payment systems such as PayPal, Google Wallet and Apple Pay; crowdfunding; robo-advisors; and the latest new rage: digital payment rails such as cryptocurrencies and distributed ledger technologies.

Out of all the fintech innovations I’ve carefully studied, it is the latter — cryptocurrencies and distributed ledger technologies (DLTs) — that has most captivated my attention and appealed to my investing sensibilities.  

It is important to note, however, that I have not been one of those investors who threw caution to the wind and jumped on the cryptocurrency bandwagon when the market boom was originally ignited with Bitcoin.  Rather, I started reading everything I could get my hands on that would help me to understand and appreciate the complexities of this worldwide phenomenon and satisfy my need to balance risk and reward. As a result, I remained on the sidelines for the most part and watched and learned.  But, now I’m getting into the game in a big way.

As of this writing, there are over 1600 cryptocurrencies on the market – some boasting market values of billions of dollars, while others are virtually worthless. You have to wonder: How was each of their values ascertained?  Is a specific coin currently overbought or is it oversold? Unlike a company, a cryptocurrency doesn’t earn revenue by producing products or offering services, nor does it employ people. And, unlike a stock, there are no fundamental metrics to accurately assess an altcoins fair market value, much less its promise of long-term stability and growth potential.  Or is there?

I’ve determined that asset-backed altcoins make the most sense. Altcoins backed by fiat currencies rely on too many uncontrollable factors, such as economic growth, interest rates and inflation.  While there are now diamond-backed cryptos, oil-backed cryptos, contract-backed cryptos and even real estate-backed cryptos, a gold-backed crypto could offer the greatest possible level of long term stability.  After all, gold has been viewed as a safe-haven asset for millennia. By using a physical precious metal, like gold, to back something up on a distributed ledger, the altcoin’s intrinsic value is retained, unlike Bitcoin or Ethereum, which really have no intrinsic value.  

From my vantage point, betting on the right gold-backed cryptocurrencies is a potential win-win-win.  It represents the best investment strategy for an investor, like me, who wants to capitalize on the accelerating cryptocurrency phenom, secure his or her downside and enjoy what could be a windfall on the upside.