The digital transformation is underway. In recent years, digital assets have started to mature, evidenced by increased global adoption by both retail and institutional investors. Against this backdrop, we believe that companies involved in the digital transformation of the global economy represents a long-term structural growth opportunity that is becoming more and more accessible to investors.
What Are Digital Assets?
The term “digital assets” encompasses a broad range of technology and applications, commonly referred to as blockchain or distributed ledger technology. Digital assets can take a variety of forms, and are not just limited to cryptocurrencies.
Companies at the Forefront of the Digital Asset Transformation
The companies involved in the digital transformation are distinctly different from digital assets themselves. Digital transformation companies may range from digital asset mining to hardware to exchanges that facilitate the trading of digital assets.
Digital transformation companies may engage in only one of these business lines, or they may engage in multiple, depending on their goals, capabilities and focus within the broader digital transformation space. Below are two quick examples to illustrate how different companies are generating digital transformation-related revenues.
Square* (SQ), the top weighted payment gateway company in the MVIS Global Digital Assets Equity Index, helps sellers start, run and grow their businesses. Investors and consumers can purchase cryptocurrency on Square’s popular CashApp. According to SEC filings, Square “recognizes revenue when customers purchase bitcoin and it is transferred to the customer’s account.” In 2020, that amounted to $4.57 billion in bitcoin-related revenues, an increase of 785% from the year before.1
Voyager Digital* (VYGR) focuses on enabling users to buy and sell cryptocurrencies across multiple exchanges in one account. According to SEC filings, Voyager “offers investors, developers and platform providers a fully functional suite of APIs and mobile apps to allow anyone the ability to invest, earn and secure multiple types of digital assets.” As of March 31, 2021, Voyager had over $2.4 billion in assets under management and 270,000 funded accounts.2
Digital Transformation Companies Reflect a Structural Growth Opportunity
The opportunity set of publicly traded, pure-play digital transformation companies is still young, but has grown in both size and revenues over the last few years. Despite underlying volatility in digital assets themselves, many publicly traded companies are investing heavily in new business lines to position themselves favorably as digital asset usage and adoption continues to accelerate.
The digital transformation opportunity set currently has fewer listed companies compared to more mature industries. However, we believe that as digital assets use cases and adoption grow over time, these early-mover companies may benefit, and that more digital transformation companies will go public.
Recent Comments