Market Research
How Inflation Can Influence Investment Awareness
Inflation has both direct and indirect effects on changing individuals' attitudes towards investing. Inflation can make people realize the importance of investing by significantly reducing the purchasing power of money over time. When someone sees the prices of goods and services they consume, such as essentials, rising directly in the stores they usually visit, while the real value of their savings is indirectly decreasing, it makes many people aware of the importance of investing to protect and grow their current wealth. This economic phenomenon continues to occur and spread rapidly, leading people to seek various investment opportunities that are considered profitable.
The Declining Value of Cash
In our daily lives, we can see how inflation directly affects aspects of our lives, from increasing living costs to the rising prices of property and children's education, among others. This results in a decrease in the goods and services we can consume each year. If we assume an annual inflation rate of only 3%, monthly spending that usually costs $100 would rise to $103 in the following year. This increase helps us realize the need to find alternative solutions for storing our money, as holding cash over time can indirectly be detrimental to us.
Seeking Solutions to Counter Inflation
To combat the negative effects of inflation, we need to explore and research various available investment alternatives such as stocks, real estate, commodities, cryptocurrency investing, and others.
Stocks: Historically, stocks can provide returns that exceed inflation. Companies that offer their shares to the public can raise the prices of the goods and services they sell. This can generate higher revenues and profits, which can be used for company development, indirectly benefiting shareholders.
Real Estate: Property values and rental income tend to increase with inflation. This makes real estate a popular investment choice for many people. Real estate investments can offer two types of income: first, direct income through property rentals and second, capital gains from the appreciation in property value.
Commodities: Physical commodities like gold, silver, and oil can also be used to preserve wealth or even increase it during inflationary periods. These tangible assets are regarded by many investors as a store of value and can protect investors against the effects of currency devaluation.
Cryptocurrency: The next investment alternative is cryptocurrency. Cryptocurrencies offer high liquidity and explosive growth potential, but this investment alternative has a high degree of volatility. This investment requires relatively low initial capital and is accessible to more people compared to real estate.
Comparison of Investment Growth
Each type of investment has different growth characteristics and attributes:
Stocks: Stocks are considered to provide relatively stable long-term returns, but short-term volatility can still occur. Stocks tend to have lower liquidity compared to cryptocurrencies, but are considered more liquid than real estate. Investing in stocks also heavily depends on the performance of the companies invested in. If a company experiences internal problems (issues that cannot be controlled by public investors) or a decline in performance, the value of the stock can drop significantly. Stocks also have the drawback of market uncertainty. The stock market can be influenced by many external factors that cannot be controlled by investors, such as economic crises, interest rate changes, and geopolitical events, all of which can affect stock prices.
Real Estate: Real estate is considered by many investors as an alternative investment that can provide stability. Although it has slower growth compared to other investment alternatives, real estate is seen as offering significant returns. Investors can choose from several schemes to profit from this investment alternative, such as selling the property and gaining from its appreciation or renting out the property for direct income. However, this investment alternative is not without its drawbacks. Some of the disadvantages include relatively low liquidity, high initial capital, and property market risks. Real estate has lower liquidity because the process of selling property often takes a considerable amount of time and involves lengthy processes. Additionally, real estate is an investment alternative that requires substantial initial capital. Moreover, property values can be affected by local market conditions, including demographic changes, regional economic conditions, and even government regulations.
Commodities: Commodities like gold, silver, and other valuable products are often used by investors as alternative investments to protect their wealth against significant inflation. Commodities have shown strong performance during recessions and periods of high inflation. However, beyond their ability to combat value reduction due to inflation, commodities have several drawbacks, such as high volatility, difficulty in storage and transportation, and the lack of a way to generate steady income. Commodity prices are highly dependent on global supply and demand, which can be quickly affected by changes in global economic conditions, politics, and even the weather. Commodities also have a physical form; items like gold and oil require secure storage facilities, and the transportation costs for commodities can vary widely and tend to be high. Additionally, unlike stocks that can pay dividends or real estate that can generate rental income, commodities do not produce steady income, and profits can only be obtained through the appreciation in the selling price of the products.
Cryptocurrency: This investment alternative offers growth potential that can be very high in a relatively short period, although it carries greater risks and higher volatility compared to other investment alternatives. There are several drawbacks to this investment alternative, including extreme volatility, lack of regulation, and security risks. Cryptocurrency prices can change drastically in a short time, so investors need to be more cautious, especially those who are not prepared to face significant price fluctuations. Additionally, cryptocurrency is still in a legal gray area in many countries due to its relatively recent emergence, which can pose regulatory and security risks. Another drawback is the risk of hacking and fraud, as investors are not yet fully familiar with this investment alternative because of its very young age.
The Role of Education in Increasing Investment Awareness
As individuals become more aware of the impact of inflation, their interest in financial education can also increase. An investor needs to understand how various investment alternatives work and the potential they offer to protect their wealth from the adverse effects of inflation.
The Impact of Inflation on Financial Behavior
Increased awareness of the adverse effects of inflation can lead to more organized financial behavior. Many investors prefer to diversify their investments, regularly review their financial plans, and stay informed about current economic trends. This proactive approach helps investors maintain or enhance their financial stability, even amidst rising prices due to the impact of inflation.
Benefits of Investing in the RWA Ecosystem
Currently, investment in Real World Assets (RWA) is gaining significant popularity, with many investors viewing RWA as an attractive investment alternative. The RWA ecosystem allows investors to access and invest in real-world assets such as real estate, infrastructure, and commodities through blockchain technology, which offers several significant advantages:
Transparency and Security: Blockchain technology ensures that all transactions are recorded transparently and immutably, reducing fraud risk and increasing investor trust.
Liquidity: Tokenizing real assets allows investors to buy and sell portions of these assets, enhancing liquidity compared to traditional investments that usually require large capital and lengthy sales processes.
Accessibility: The RWA ecosystem provides retail investors access to assets that were previously only available to institutional investors or high-net-worth individuals.
Growth and Landscape of RWA
Data shows that investment in RWA continues to grow year by year. For instance, a Deloitte report indicates a significant increase in the adoption of tokenization technology in the real estate sector, which is expected to continue growing as understanding and trust in this technology increase. According to DeFiLlama, the total value locked (TVL) in real-world assets (RWA) in DeFi has reached approximately $5.958 billion, showing significant growth and increased interest in integrating real-world assets into the blockchain ecosystem.
How the RWA System Works
The RWA system operates through several key steps:
Tokenization: Real assets such as property or commodities are converted into digital tokens on a blockchain.
Custodian: Physical assets are held by a trusted third party as custodians to ensure security.
Trading and Liquidity: These tokens can then be traded on digital platforms, allowing investors to easily buy and sell portions of the assets they own.
By using the RWA ecosystem, investors can enjoy the benefits of portfolio diversification, greater transparency, and higher liquidity while still investing in stable and tangible assets.
Market Size and Potential Growth
Growth of the RWA Ecosystem in Southeast Asia: Potential and Market Prospects
The growth of the Real World Assets (RWA) ecosystem in Southeast Asia shows significant potential, driven by the adoption of blockchain technology and the need to enhance investment liquidity and accessibility. Here are some factors supporting the growth of the RWA market in Southeast Asia:
Adoption of Blockchain Technology: Blockchain technology now enables the tokenization of real-world assets. This can be used to simplify transactions and reduce operational costs, making investments more affordable and accessible to a wide range of investors.
Need for Investment Diversification: With the global economic conditions being uncertain and potentially volatile in a short period, investors in Southeast Asia are looking for ways to diversify their portfolios into assets that provide more stable and tangible returns. This also increases market demand for the RWA ecosystem.
Digital Economy Growth: Southeast Asia is experiencing rapid growth in its digital economy. According to Bain & Company ("e-Conomy SEA 2023"), the digital economy in Southeast Asia is growing rapidly, reaching over $100 billion in 2023. This growth creates significant opportunities for investment in the RWA ecosystem.
Data and Statistics on RWA Growth
According to data from DeFiLlama, the total value locked (TVL) in RWA on DeFi platforms has reached significant levels, indicating broad adoption and growing interest in integrating real-world assets into the digital financial ecosystem.
Total Value Locked (TVL): TVL for RWA in DeFi has reached billions of dollars, with the amount continuously increasing over time, indicating market maturity and acceptance of the RWA concept.
Use of RWA: RWA in Southeast Asia is widely used in sectors such as real estate, infrastructure, and commodities. This not only enhances transparency and efficiency in transactions but also opens opportunities for higher liquidity for investors entering these assets.
Key Market Players: Several major institutions have invested in startups and financial institutions offering RWA-based products, indicating strong support from both the private and public sectors for developing the RWA ecosystem.
Impact on Investors
Investing in RWA in Southeast Asia offers several attractive benefits, including high potential value appreciation, passive income through dividends or rent, and protection against inflation. Investors should consider including RWA as part of their portfolio diversification strategy, especially in the current economic environment filled with uncertainties.
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