Everyone is talented in their own way and are good and bad at different things. By working collaboratively, we can learn from the other team members’ expertise, experiences and backgrounds. I work with the best traders and fund managers around the world. Yes, I deal with a lot of people who are smarter than me and who are also happen to be very generous.
Cryptos and digital assets as an emerging asset class is deeply misunderstood by most investors. I learn a lot about investing in this space from my partners who are based in Australia. The team runs an actively managed fund focused on the digital currency investment space.
The fund focuses on uncorrelated returns while implementing a multi-strategy, absolute-return approach. Wonderfully, their flagship fund is up more than +80% since 2020 at a fraction of the market volatility. When they speak, it’s always worth listening. Here is a section from their latest monthly commentary.
We believe we are at the tipping point of a very rapid surge in adoption of crypto assets, and this is underpinned by the actual growth in both institutions and government as detailed in past updates, combined with the private sector seeking independent alternatives for everything from money transfers to loans being enabled by DeFi alternatives and the further potential provided in Web3.0.
In addition, cryptocurrencies are unencumbered. Judging by the relative smallness of the crypto market today (USD1.1 trillion), traditional savers and investors do not seem to care that all prevailing debt is denominated in fiat currencies, and that unencumbered cryptocurrencies will soon be available to replace them.
Interestingly, the total volume of bitcoin held of both spot and derivatives crypto exchanges is at the lowest since 2019. As for the volume, we reached the lowest level since 2018 as per the chart below.
The crypto market is effectively long-term “VC-like” investing with real-time, public market pricing and liquidity. The biggest positive in allocating to the market is the ability to own liquid assets that can generate returns far superior to those in other markets. The obvious negative is the potential to lose all of one’s investment via direct token investment.
The risk of total loss can be mitigated by allocating across various digital asset sectors by use case and time horizons and by limiting one’s allocation to the digital asset class to a smaller position, around 2%-5% of a portfolio. This small allocation to the crypto market that could rise by 10x or 20x in the next bull market would likely be a meaningful wealth creator.
We continue to believe that crypto assets are the greatest opportunity for wealth creation and democratisation of access to capital and participation in the global economy and that this will give rise to the next unicorns, regardless of governments attempts to stifle it.
From a regulatory perspective, the safest way for allocating in a compliant and efficient manner to the public crypto market is through a dedicated, regulated, financial service license-compliant cryptocurrency and digital asset focused fund with independent administrators and a fully audited track record that accepts suitable investors only.