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Blockchain technology and digital currencies are emerging as one of the fastest-growing technologies, even surpassing historical adoption rates of major innovations like the internet and mobile phones, according to a BlackRock executive specializing in thematic investing.
“This is one of the fastest-growing technologies we’ve seen in the last few years,” Jay Jacobs, the U.S. Head of Thematic and Active ETFs at BlackRock, said during the Digital Assets Conference Brazil 2024.
Jacobs noted that the economy is more connected than ever before in the digital age and said that the world’s consumption patterns have shifted online, with people engaging in activities like streaming, gaming, and buying digital content.
“If we’re consuming things online, streaming videos, playing video games, buying digital content, it makes sense to have digitally native assets to conduct those transactions,” he said.
BlackRock also shared a chart indicating the adoption trajectory of blockchain and digital currencies. The chart showed a steeper growth curve for digital assets compared to the internet or mobile technology.
Declining Trust in Institutions Drives Demand for Digital Assets
Jacobs claimed that the rise of cryptocurrencies is largely linked to declining trust in traditional institutions. Across the world, skepticism towards governments, financial institutions, and central banks has been on the rise.
In an April analysis, American analytics and advisory company Gallup revealed that approximately 68% of Americans lack confidence in their national government. Confidence in the judiciary stands at a low 42%.
With citizens questioning the stability of their national currencies and traditional financial systems, digital assets have emerged as a potential alternative. Jacobs said:
“Whether that’s trust in government institutions for maintaining peace and order [or] whether that’s trust in central banks in terms of keeping inflation under control. More distrust has exacerbated the need for a global monetary alternative.”
The BlackRock executive added that cryptocurrencies, including Bitcoin and Ethereum, present an attractive option for those seeking decentralized and transparent alternatives to state-controlled monetary systems.
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Millennials and Gen Z Lead in Terms of Adoption
Millennials and Gen Z are driving the adoption of digital assets, Jacobs said during the conference.
“And millennials are very different from previous generations because they, we, me, were the first generation to be digitally native, growing up with the internet, growing up with computers.
BlackRock’s analysis highlighted that younger generations are significantly more likely to hold and trade crypto assets than their predecessors. This trend is expected to grow as these generations continue to gain financial influence.
A YouGov research from April also supports this finding. The survey, commissioned by crypto exchange Bitpanda, revealed that Gen Z and Millennials are at the forefront of cryptocurrency adoption in Europe.
Ease of Access and Maturation Further Drive Crypto Adoption
The ease of access to digital wallets, decentralized finance platforms (DeFi), and crypto exchanges has further facilitated the adoption of cryptocurrencies.
Moreover, the maturation of the infrastructure supporting digital assets has played a crucial role in this rapid adoption, the executive said.
Over the past few years, substantial investments have flowed into the sector from venture capital and private equity.
“We’ve seen billions of dollars move for inventor capital and private equity into digital assets to fund incredible innovation in blockchain.”
For instance, in the second quarter of 2024, crypto startups managed to attract $2.7 billion in funding across 503 deals, marking a 2.5% increase in invested capital.
Jacobs also noted that there have been some notable regulatory improvements in the world of digital assets. As governments and regulators provide clearer guidelines around the trading and custody of cryptocurrencies, it has become easier for institutional investors to participate in this market.
Despite the rapid growth of digital assets, the executive emphasized that this is still the early phase of a long-term trend. The market capitalization of cryptocurrencies, which stands at around $2.9 trillion, is relatively small compared to traditional markets.
Yet, the focus remains on the two dominant digital assets, Bitcoin and Ethereum, which together account for about 75% of the digital asset market cap.
“We feel that between these two assets, which represent about 75% of the market cap of the digital assets space and have some of the most liquidity in the digital assets space, we can really start to make headway in terms of bringing out accessible vehicles to more investors.”
The Bottom Line
The shift in digital consumption and declining trust in traditional institutions has fueled the rapid adoption of blockchain technology and digital currencies, even outpacing the adoption rates of technologies like the internet.
With the younger generations growing up as digital natives, it makes far more intuitive sense to them to have digital currencies — will the world bend to their views and see the benefits that decentralized and non-state-owned currencies can bring?
