Some start-ups are using the latest technology to disrupt the largest and oldest financial sector.
Faced with endless thematic funds and obscure financial products, the most important trend in 2020 is that the money market exchange-traded funds (ETF) reach a record high, with a total value of more than 4.6 trillion US dollars. All this is due to the power of AI and automation technology.
ETF represents a strictly authorized fund that must maintain precise capital allocation in a series of predefined products. As asset prices rise, ETFs must redistribute assets to maintain strict control. Faced with the sharp increase in the daily average fluctuation range of total capital, ETF management has become quite tricky. In this regard, AI and automation technology can help fund managers process thousands of transactions every day, and rebalance as the market changes, finally complete tasks and manage large amounts of funds on a large scale.
Money market ETFs provide investors with security, retaining their capital in turbulent markets while continuing to generate moderate returns. Because of this, with the outbreak of the global epidemic, investors from all over the world hope to convert their original investment portfolios into currency market ETFs as much as possible, so as to survive a period of economic uncertainty. Similarly, many investors choose to buy digital assets such as Bitcoin. Some experts believe that by virtue of a fixed supply controlled by a fixed programming method, cryptocurrencies are expected to hedge against possible severe inflation.
In this regard, AI, automation, and digital assets have begun to converge wonderfully, and together form the most important trend in the financial sector in 2020-the automated currency market for digital assets. It is the combination of these technologies that has promoted the birth and development of innovation and financial technology start-ups. These rising stars are using the power of technology to attack the mainstream of modern finance and currency markets.
During periods of uncertainty, the currency market often shows particular appeal. Investors began to pour into money market funds in early March 2020. This trend was initially only stimulated by the economic recession warning, but throughout the entire period of the new crown virus epidemic this year, the money absorbed by the money market has always been rising, which is also inseparable from increased volatility and people's judgments on the duration of the economic downturn. . In this regard, AI technology has provided strong support for many modern money market funds, and has begun to transform the entire market into a common fund. People are increasingly using AI traders, or "automated traders", to invest in high-quality short-period debt instruments, cash, and various cash equivalents.
Although money market funds are not as safe as cash, they are still regarded as a very low-risk direction in the investment field. The money market ETF itself has also become a major AI trump card application category in the financial sector. And as the economic situation continues to decline, the number of users in this part of the market supported by AI has begun to increase. The currency market began to provide reliable guarantees for capital in a complex historical period. The funds contained in the money market mainly flow to high-quality and highly liquid short-term debt instruments, such as U.S. Treasury bonds and commercial paper. Although the income from such investments is limited, the income is still better than the interest rate and has approached zero. Or even go to negative conventional savings. From a historical perspective, AI has always been the main technical means to drive traditional currency markets.
Although money market ETFs use AI and automation technology to invest most of their funds in cash equivalents or short-term high-rated securities, some institutions use a certain percentage of funds to purchase long-term or lower-rated securities. There are currently many traditional money market ETFs driven by AI on the market, including iShares Short-term Treasury Bond ETF (SHV), iShares Short-term Bond ETF (NEAR), SPDR Bloomberg Barclays January-March T-Bill ETF (BIL) and Invesco Ultra Short-term ETF (GSY) etc. At the same time, the enhanced AI-driven currency market is showing a new and important trend, that is, the decentralized currency market. Today's competition has long become a technological confrontation. Therefore, the traditional currency market must explore the potential benefits of combining AI and blockchain, hoping to meet the actual requirements of investors in 2020.
The overall trend of new users depositing large amounts of funds into the decentralized currency market may prove that decentralization is expected to be the next development direction of the currency market. Silicon Valley also generally believes that only the most promising emerging technologies can attract the strongest growth opportunities. Coupled with the influence of the overall situation such as the economic recession, the currency market is likely to continue to attract more funds to join in 2020 and beyond.
"The Wall Street Journal" quoted Refinitiv Lipper's reported data, saying that the total assets recently deposited in such funds have reached $4.6 trillion. This is also the historical high of the total money market capital since 1992.
The inflow of capital has also brought clear signals to industry experts. The currency market will have stronger cash deployment capabilities, so it has the opportunity to expand its business to markets that require higher risk tolerance. But from the perspective of investors, the S&P 500 index, which has remained positive from the beginning of the year to last week, suddenly plummeted again due to concerns about the new crown epidemic. Some experts believe that the changes in the index have been overreacted, and some experts are even optimistic that the global economy will recover soon.
Cash assets began to surge in February this year, which also responded to the first round of plunge in the investment market due to concerns about the new crown virus. Investors began to pour into money market funds, and U.S. Treasuries began to sell stock and corporate bond positions. At the same time, the Fed's entry into the corporate credit market has injected confidence into risky assets and promoted a wave of rebounds in risky assets in April and May this year. In the face of complex changes, some investors believe that the economy will recover quickly, but many investors have begun to prepare for the worst. In any case, the growth of the money market continues, because both types of investors will regard the money market as an attractive investment object in times of uncertainty. As this demand continues to grow, so does the actual demand for the technology that drives the development of the money market.
Harvest.io's new currency market for Bitcoin and other assets is expected to bring a comprehensive solution to this field worth 354 billion US dollars. As the popularity of cryptocurrencies continues to increase, Harvest.io hopes to provide natural expansion for the current financial system and help more users use digital assets to achieve lending, borrowing, and profitability capabilities.
The Harvest.io platform also provides native assets and asset code HARvest (HARvest Decentralized), aiming to provide all token holders with a voice channel on the continuous operation and development of the cloud centralized platform. "Harvest.io uses a decentralized open infrastructure that allows any individual, business or financial institution to access its money market products."
Image: Harvest.io
According to Brian Kerr, co-founder and CEO of Kava (a decentralized platform built on Harvest.io), the currency market that Harvest created for Bitcoin and other digital assets also fits the historical trend: Paul Tudor Jones and others Heavyweight investors and listed companies such as Square and Microstrategy announced that they have accumulated a large amount of Bitcoin to increase their investment portfolio and protect corporate capital income. Harvest's currency market can be described as the right time to provide these participants with more substantial returns on digital assets.
The AI-based currency market has previously proved the huge advantages of technology in the investment field, and blockchain technology is expected to continue to drive user demand for these new products with the additional benefits of extremely high efficiency.
If 2019 is an important first year for AI technology to become the mainstream technology that promotes the growth of the money market, then 2020 is expected to be another milestone for blockchain to surpass AI to become a cutting-edge technology solution. Of course, it must be admitted that in one or two years of this year, blockchain is still unlikely to fully catch up with AI technology in the overall financial services field. Today the core focus of the entire industry is still on the digestion and application of AI technology.