Investors warned that crypto ‘yield’ products are not bonds

Investors warned that crypto ‘yield’ products are not bonds

It’s not often that an investment can be compared both to safe, bog-standard bonds and to risky venture capital holdings. But that is currently happening with certain crypto asset schemes — as new developments in digital finance continue to bend old definitions.

With investors shovelling billions of dollars into new Bitcoin-tracking ETFs in the US, the debate around what purpose — if any — cryptocurrencies can serve within portfolios is changing.

Bitcoin, the largest cryptocurrency, has been compared to “digital gold” by many investors, who believe it can serve as a defensive asset against inflation and a counterbalance to other risks.

However, some investors are wondering whether certain crypto-based strategies could provide an alternative to holding bonds as a source of fixed income streams. And it is becoming an area of growing interest with bond returns stuck at low levels and the amount of negative yielding debt, worldwide, close to record highs.

Right now, there are several ways that investors can seek passive yields via crypto markets.

First, it is possible to lend money to other parties on both centralised and decentralised crypto platforms, and earn competitive interest rates. For example, SEBA — the Swiss regulated crypto investment bank launched by a pair of former UBS