Many people have asked me “Why do you invest in the crypto and digital assets space?” I believe that investing in digital assets is one of the biggest opportunities in our lifetimes and the digital assets / blockchain ecosystem could have profound impact on the world. Specifically, I have considered investing in digital assets from three perspectives: 

 

1. Digital Assets as a Store of Value:

Bitcoin offers a viable alternative as a store of value in the digital age. If you are storing wealth for future generations, holding assets in fiat currencies long-term is one of the worst ways to store that wealth. The value of US Dollar has depreciated 90%+ against gold in the past 50 years. The reason for this devaluation is because the supply of fiat currencies is not fixed. Central banks print more money during crises to prevent economic recessions and large increases in unemployment. Owning assets with a fixed or limited supply is one of the ways to secure value for future generations.  

 

Gold and Bitcoin have a fixed or limited supply and as a result, offer interesting hedges against fiat currency       devaluations. Gold’s supply has only increased by 1-2% per year in the past 100 years because gold is difficult to mine. Gold is now trading at all-time highs (gold futures now trade above $2,000 per ounce). Bitcoin’s supply is capped at 21mn coins. Bitcoin is durable, difficult to produce (mining takes computational power), and difficult to counterfeit. The main difference that I see between gold and Bitcoin is the upside potential. In my opinion, gold could increase 50-100% whereas Bitcoin could increase 1,000% in the long-term.

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​2. Digital Assets as a Growth Asset Class:

Another opportunity that the digital asset class offers is growth. If investors are already investing in technology stocks for growth, they should also be looking at the digital asset ecosystem for growth. This ecosystem has been built so that entrepreneurs with great ideas can have access to capital and technology. These are the key ingredients for a “Cambrian explosion” in innovation. Digital start-ups are popping up at astonishing rates. An example of this is the DeFi movement built on the Ethereum blockchain. When we wrote about DeFi in our last month’s letter, the value locked up in DeFi was $1.9bn. Today, the value locked up in DeFi is $4.3bn. There are hundreds of these projects underway and while many of these projects will fail, some will turn out to be technologies that change the world. ​

 

3. Digital Assets as a Trading Asset Class:

Cryptocurrency is one of the most volatile asset classes in the financial markets. The chart below shows that Ethereum has outperformed all major asset classes in 2020, increasing by +183%. However, if you had entered and exited at the wrong times, you would have found yourself with a -62% loss this year. Many will look at this volatility as a risk, but we see it as an opportunity to generate outsized returns. Our fund uses big data, artificial intelligence, and machine learning algorithms to trade in the digital asset space. We are building unique and proprietary quantitative and fundamental models to analyse this market. This is our thesis to drive higher returns, higher Sharpe ratios, and lower risk than what you can get from investing in traditional assets. ​