Digital Assets: Not a Monolith
There remains a misconception that digital assets are a monolithic asset class, dominated by beta and lacking differentiation. The line of thinking goes: “everything moves together, so why not buy only Bitcoin and be done with it.”
We disagree.
Advancements in the blockchain space over the past several years have spurred a wide array of innovative use cases far beyond Bitcoin’s original peer-to-peer payment design. This evolution has broadened token applications and introduced diverse return drivers across sectors. For example, in the most recent quarter (4Q24) the DeFi sector displayed a robust +55.9% average return followed closely by Layer 1s at +49.7%, while other sectors such as Infrastructure (+13.5%) and Modular Layers (+14.6%) were laggards.
To illustrate the extent of dispersion in the liquid token space, our analysis below compares the quarterly mean and median inter-quartile ranges (IQR) of digital asset sectors with those of GICS S&P sectors (2021–2024). The results are striking: digital asset sectors exhibit much higher dispersion than equities (~68% vs. 11% for the mean and ~35% vs. 8% for the median). Such dispersion suggests an opportunity for outperformance through targeted sector weighting and asset selection.
Recognizing that digital assets remain a nascent and volatile asset class, we also present returns adjusted based on total benchmark performance. Despite this normalization, the value-weighted IQR remains high while the equal-weighted IQR aligns with S&P 500 sectors. This dual perspective highlights both inter- and intra-sector dispersion, challenging the notion that digital asset portfolios lack idiosyncratic return drivers.
Although volatility is inherent to digital assets, the pronounced dispersion strengthens the investment case for diversified, thoughtfully constructed portfolios which could offer opportunities for strong risk-adjusted returns.
*The information herein is for general information purposes only, is not investment advice, not an offer of a Fund, and should not be used in the evaluation of any investment decision. Such information should not be relied upon for accounting, legal, tax, business, or investment advice. You should consult your own advisers, including your own counsel, for accounting, legal, tax, business, investment or other relevant advice, including with respect to anything discussed herein. An investment involves a high degree of risk. Past performance is not necessarily indicative of future results.
*Returns noted are general sector returns and do not account for trading, management, or other fees or expenses all of which would lower returns.
