Plutux Blog

Buy a Picasso with a Few Tokens

Posted by Karen Zhu on Oct 3, 2018 2:16:29 PM

Is it possible to participate in high-return-yet-illiquid assets?

 

Are you still investing in bonds or stocks regarding Hang Seng Index has dropped from more than 33,000 to about 27,000 in 10 months? How about buying pieces of a Picasso? Fine Art has been emerging as a new asset class for the well-diversified portfolio as it is uncorrelated to the general markets. A piece of art can generate a consistent ROI over a 5 to 10 years period.

 

Alternative investments have always been a high-return-yet-illiquid asset class including:

  • arts and boutiques;
  • real estate;
  • PE funds;
  • shares in start-ups and etc

But these investment categories have high entry barrier to the public because of capital requirement and requisite domain knowledge. Return of this kind of investment is much higher than your expectation. Take the Fine Art market as an example:

Masterpiece paintings have outpaced growth
(source: Masterworks )

 

Such an opportunity is not for the ordinary but for those who have an insight into investment and able to seize the trend.

 

As you may be aware, risk-return tradeoff is common trading principle that links high return is always accompanied with high risk. Public is facing several challenges including high entry barrier, illiquidity, and portfolio risk if they want to participate in alternative investment. If we look at a certain art piece, it can sell up to $80 million and the auction house is expecting one single player or a private syndicate to come in to purchase that.

 

So how could I buy pieces of a Picasso? The answer is: tokenization.

 

Tokenization has offered a new solution for the public to overcome these challenges. You can imagine how interesting it would be that instead of one $80 million art piece, it can now sell at 80 $1 million tokens for that piece of art. People all around the world could take part in the upside value or the appreciative value of that piece of art. According to Global Wealth Report, total global wealth has now reached USD 280 trillion and much of the wealth is illiquid. Asset tokenization allows investors to realize the potential of those illiquid assets. As claimed by Stan Pearson, an advisory professional from a blockchain company, the asset tokenization of commercial real estate alone can ambitiously target a USD 5.4 trillion liquidity premium market, which is almost 10x bigger than the market cap of all cryptocurrencies put together.


A comparison table regarding the alternative investment field before and after tokenization:

Challenges

Before Tokenization

After Tokenization

High entry barrier

High capital requirement and requisite domain knowledge

High value items can be divided and traded fractionally

Illiquidity

There might not be enough and suitable buyers and sellers in the market

Participants can use less amount of wealth to enter the market and exchange platform offers a place for them to complete price discovery process

Portfolio Risk

Alternative investment might requires a high percentage of one’s total wealth; term premium

Investors can balance their portfolio with more options

 


 

Plutux is the first cryptocurrency to cryptocurrency exchange to empower traders with customizable and user-friendly advanced trading features in a mobile-centric, gamified, regulated and ethical environment. Upon acquiring a securities license, Plutux will develop into a securities exchange enabling the tokenization of new and traditional securities.

We invite you to visit our website where you can find about our launch and learn about our revolutionary platform in full detail. Please stay up to date through our social media channels on:

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Risk Disclosure

Investment in Bitcoins (or any other cryptocurrency) involves greater risks than associated with investment in traditional currencies or assets and as a result losses of capital may occur. We advise that you should not invest more than you can afford to lose.

Trading on an Exchange carries a level of risk and may not be suitable for everyone. Trading through an online platform could carry additional risks. You should therefore carefully consider whether trading and Bitcoin investment are appropriate for you.

For full risk disclosure, please click here

Topics: Asset Tokenization