Open Finance

Capital Inflows

Sustained low interest rates will drive investors into alternative investments in the next decade. Low interest rates have driven equity prices higher due to unattractive yields and inexpensive money. As equity market returns decrease from over 20% in the last decade to something closer to 6% people will naturally seek alternative investments to achieve higher than average returns.

“Investors chase yield; yield can be found in CRYPTO.”

When there is no reason to believe interest rates will rise in the near future savvy investors will look for alternative means to achieve yield. Interest rates, bond and treasury yields will be flat over the foreseeable future. This stagnation will FORCE many investors and asset managers to seek alternative ways to achieve satisfactory returns and appease mandates.

Ergo capital flows from passive investment strategies to active management. When active managers receive more capital they will look to alternatives to capture high returns. Active managers are INCENTIVIZED to achieve the highest returns possible through the AUM/Performance structure many of them adhere to.

Open finance, that is being cultivated in crypto then becomes a plausible investment vehicle for many seeking returns that out pace 5%–6%. Open finance currently offers 8% returns on certain stable coins such as USDC, 6% on Bitcoin, and many options to leverage existing crypto holdings as collateral to either increase positions or hedge risks.

As capital flows in, crypto will grow both horizontally and vertically. Horizontally with more offerings in the form of lending and borrowing and vertically in the form of options and synthetic derivatives built on existing foundations such as Bitcoin and Ethereum. Horizontal tactics will widen existing crypto offerings, while vertical building will EXPAND crypto utility.

In conclusion, 2020 will be the beginning of a flow of capital from traditional equity markets to crypto. Investors and managers will focus on crypto markets to achieve the returns they had in equity markets in the 2010’s. Interest rates will remain low causing many retail savers look elsewhere for yield. Crypto savings accounts are a way for people to acquire stable coins backed by USD and receive upwards of 9% by lending to borrowers. Equity market return stagnation and sustained low interest rates will bring more money and incentives to crypto.