Getting Up to Speed on Crypto and Digital Currencies
AM with a PM
Leah Traub, Ph.D.
Partner & Portfolio Manager
Air Date: April 28, 2021
Hi, this is Leah Traub, Partner and Portfolio Manager in taxable fixed income.
INTERSTITIAL: “Crypto” vs. Digital Currencies
So let's talk about a very hot topic right now in the markets, and that’s cryptocurrencies and the concept of digital currencies. We're hearing both talked a lot about in the media and also in bank reporting and it's causing a lot of excitement, I would say, within the financial markets.
You know we've seen rapid rises in some of the crypto currencies, namely bitcoin--you know, this year we just saw the IPO of Coinbase, which is an exchange to trade cryptocurrencies, so just a lot of excitement in the market.
At the same time, we are also hearing a number of central banks, both developed market central banks, such as the Bank of England, the [U.S.] Federal Reserve Bank, the European Central Bank, and also the emerging markets, central banks in China and India, really talking about issuing their own digital currencies.
Now one big misconception that I think is out there is that the [contemplated] central bank digital currency is not the same as the cryptocurrencies such as bitcoin and ether that that we've been hearing about. Now they do have something in common, and that is that they are both digital, they're both electronic currencies, so to speak, so there's no physical dollar bill, or coin that that you're holding.
But the similarities kind of end there, right--the concept of cryptocurrencies and how those really came about is that it's decentralized, [not] issued by a central bank, by a government [and not] controlled as part of the official money supply, for example. It is decentralized [in] that it's backed by this, really kind of innovative technology called blockchain which is how you keep track of the buyers and sellers and in the marketplace.
Now a digital currency, one of the central bank digital currencies that they're talking about, is actually going to be backed by the central bank. [So in] that way it is similar to a regular currency. So if we think of a digital dollar… now it will still be digital and electronic and the idea is that you'd be able to use it to pay for things--you'd also be able to use it for savings--but it would be centralized, meaning that it would be part of the money supply and really, part of the central banks.
And there is, you know, a lot of interest from the central banks to have this in their arsenal and really have it, so that they can control it.
INTERSTITIAL: Trends to Watch
And you know the emerging markets, for example, where we have a lot of, you know, we have large portions of the population that are unbanked, for example, and they're very hard to reach in terms of deposits. And you know, such as in India, there is a lot of interest in getting them into this digital currency market to make it much easier for those dispersed populations in order to have this payment mechanism.
And so, so this is something that we're following very closely, we do think kind of over the next five years, we will see the Central Bank digital currencies, maybe even you know, before then, and we do think that that the use of them can become pretty widespread.
Now, there will still be a place in the market for these cryptocurrencies that are still decentralized, backed by this blockchain technology. They would still be used as maybe a store of value, obviously, they would still have some anonymity associated with them. So there’s definitely still a place for the cryptocurrencies going forward but [there] would actually be two separate types of currencies within the marketplace.
Thank you for listening and thank you for your continued interest in Lord Abbett.________________________________________
Unless otherwise noted, all discussions are based on U.S. markets and U.S. monetary and fiscal policies.
Asset allocation or diversification does not guarantee a profit or protect against loss in declining markets.
No investing strategy can overcome all market volatility or guarantee future results.
Market forecasts and projections are based on current market conditions and are subject to change without notice. Projections should not be considered a guarantee.
This broadcast may contain assumptions that are “forward-looking statements,” which are based on certain assumptions of future events. Actual events are difficult to predict and may differ from those assumed. There can be no assurance that forward-looking statements will materialize or that actual returns or results will not be materially different from those described here.
This broadcast serves as reference material and is provided for general educational purposes only; does not constitute an offer to acquire, solicitation for an offer to acquire, an offer to sell or solicitation for an offer to buy, any securities, nor is intended to be relied upon as a forecast, research, or investment advice on any securities, and cannot be used for any of the foregoing.
The views and opinions expressed by the Lord Abbett speaker are those of the speaker as of the date of the broadcast, and do not necessarily represent the views of the firm as a whole. Any such views are subject to change at any time based upon market or other conditions and Lord Abbett disclaims any responsibility to update such views. Neither Lord Abbett nor the Lord Abbett speaker can be responsible for any direct or incidental loss incurred by applying any of the information offered.
The value of investments and any income from them is not guaranteed and may fall as well as rise, and an investor may not get back the amount originally invested. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon, and risk tolerance.
Please consult your investment professional for additional information concerning your specific situation.
The information provided is not directed at any investor or category of investors and is provided solely as general information about Lord Abbett’s products and services and to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither Lord Abbett nor its affiliates are undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity. If you are an individual retirement investor, contact your financial advisor or other fiduciary about whether any given investment idea, strategy, product or service may be appropriate for your circumstances.
This broadcast is the copyright © 2021 of Lord, Abbett & Co. LLC. All Rights Reserved. This recording may not be reproduced in whole or in part or any form without the permission of Lord Abbett. Lord Abbett mutual funds are distributed by Lord Abbett Distributor LLC.
FOR MORE INFORMATION ON ANY LORD ABBETT FUNDS, CONTACT YOUR INVESTMENT PROFESSIONAL OR LORD ABBETT DISTRIBUTOR LLC AT 888-522-2388, OR VISIT US AT LORDABBETT.COM FOR A PROSPECTUS WHICH CONTAINS IMPORTANT INFORMATION ABOUT A FUND'S INVESTMENT GOALS, SALES CHARGES, EXPENSES AND RISKS THAT AN INVESTOR SHOULD CONSIDER AND READ CAREFULLY BEFORE INVESTING.