An Evaluation Framework for Governance Tokens
Governance tokens are a complex and controversial topic among crypto investors, with opinions ranging from “novel innovation” to “mostly unnecessary”. We fall closer to the former opinion and believe that a well-structured governance token can add significant value to a project.
Positioning Digital Assets in an Institutional Portfolio
An investment in digital assets is an investment in the secular change of money, value, ownership, and business structures over the coming decades. This means digital assets should show low correlation vs other asset classes going forward and provide significant diversification benefit to a portfolio. We believe an allocation to digital assets should be a part of many modern portfolios, with such an investment diversified across a broad selection of promising digital assets.
Digital Assets in the Context of Nascent Markets in History
Digital Asset markets are in their infancy and are experiencing growing pains similar to those of the today’s major asset classes. To learn how early markets behave, we examine the rise of equities in 17th century Europe, the US stock market bubble of the 1920s, the evolution of emerging market investment in the 1980s, and, most recently, high-tech venture capital.
Diversification Part III: Application of Systematic Quality Factors onto Broadly Diversified Token Portfolios
As crypto markets mature, we see increasing value in focusing on broadly diversified portfolios of tokens.
If the last two years prove to be a template for the pace and diversity of innovation going forward, then a diversified portfolio should provide better risk / return metrics.
Backtested results indicate that a more broadly diversified portfolio (Top 75, 100) offers better value than a minimally diversified portfolio (Top 10).
We view the crypto landscape as an ‘expanding cone’ of investable assets, with an increasing number of credible projects across different use case.
Diversification Part II: Why Crypto?
In Part I of this series, we examined the return profiles of broad baskets (Top 50+) of cryptocurrencies vs a simple BTC/ETH or Top 10 strategy, showing that such diversified strategies have worked recently, and hold potential for the future.
We also acknowledged that this premise really hinges on a diverse range of cryptocurrencies having actual value. The huge amount of outright speculation in crypto may often overshadow the real long-term value being built by many blockchain projects, but we believe it exists.
In this piece we want to dig into this broad world of innovative projects and discuss how we see the universe of investable projects growing (the “expanding cone” which we referenced in our prior piece).
Diversification Part I: Performance
As crypto markets mature, we see increasing value in focusing on broadly diversified portfolios of tokens.
If the last two years prove to be a template for the pace and diversity of innovation going forward, then a diversified portfolio should provide better risk / return metrics.
Backtested results indicate that a more broadly diversified portfolio (Top 75, 100) offers better value than a minimally diversified portfolio (Top 10).
We view the crypto landscape as an ‘expanding cone’ of investable assets, with an increasing number of credible projects across different use case.