I’ve been diving into a lot lately quirky topics lately in my spare time, from personal finance basics to exploring the new AI tools soon to change the world. As it relates to investing, one struggle I’ve faced is balancing academic, practical, and future perspectives in investing and finance. Traditional finance, centralised around banks, hedge funds, and regulators, seems to be showing signs of weakness as we see high-profile bank failures worldwide.
The theory I want to discuss is that traditional finance and USD dominance are dying, giving way to a new digital world that starts with a move towards a new type of digital dollars, and a new type of digital identity. The future could involve either central bank digital currencies (CBDCs) or decentralized applications built on blockchain technology (D-apps), or a mix of both.
The world is changing, and a golden age of new wealth creation will occur in a digital realm. Despite the potpourri of risk and tremendous uncertainty around this, it’s essential to keep investing in an open-mind, especially with the exponential change happening in AI and digital wealth.
De-centralised finance is a blend of blockchain based technology and free market finance that may (once it matures) offer a viable alternative to the traditional system.
Currently, there’s a hidden war between traditional finance (Trad-Fi) and De-Fi, reflecting the Thucydides Trap, where a rising power threatens the established order, leading to conflict. For example, the US Federal Reserve is concerned about China’s progress on CBDCs, which could challenge the USD’s global reserve status. This could also be extended to the continued theme of ‘regulation by enforcement’ coming out of US monetary authorities against crypto.
Ultimately, regardless of global events, the rational move is to keep investing in blend of traditional, mainstream investments, as well as a small allocation towards a new type of future wealth.
Whether you’re new to this space or already familiar, it’s worth keeping an open mind and exploring the opportunities and risks that lie ahead in the world of decentralised finance.