Cryptocurrencies: An Overview and Financial Analysis for Inquiring Investment Professionals

Abstract

With the increase in media attention, public acceptance, and geopolitical tolerance of cryptocurrencies, it is becoming more important for investment professionals to develop an understanding of these new “digital assets”. Thus, this paper provides readers with an overview of the mechanics and utility for 3 of the most notable cryptocurrencies (BTC, XRP, and LTC) as defined by market capitalization and track record from two different vantage points: qualitatively and quantitatively. For the former, the author delves into use-cases and catalysts that could impact future adoption rates. For the latter, a financial performance and risk analysis is conducted in which the author analyzes possible return or diversification benefits imparted by a basket of cryptocurrencies in conjunction with a portfolio of traditional assets and alternative assets.

Keywords: Digital Assets, Cryptocurrencies, Bitcoin, Litecoin, Ripple, BTC, LTC, XRP

JEL Classification: Z23