Blue Chip Crypto Assets: Investment Series

Transcript

it's a pleasure to have you with us today for this webinar co-hosted with the crypto valley association along with bitcoin swiss today we're focusing on the investment side of crypto assets with a particular focus on the latest publication from bitcoin swiss which is entitled the bitcoin swiss investment digest and today we'll have first of all a presentation from our head of research at bitcoin swiss doctor marcus dapp he'll walk us through the investment digest what it contains some of the details of what we see as blue chip crypto assets at bitcoin swiss and following that we'll have a very interesting panel discussion with two guests along with dr marcus

tapp alexander toma from post finance as well as dr demelza hayes who is director of research at cointelegraph but first of all as i said a presentation on the digest from dr marcus stop so over to you marcus take us away yeah thanks a lot ian let me share my screen so all right so yeah good evening from my side as well um thanks to the crypto value association for hosting our webinar tonight and thanks to

the panelists for joining us as well for a lively discussion afterwards towards crypto blue chips is the title of the presentation and does it move it doesn't now it moves and as maybe some of you might expect we are not still not giving financial advice uh in this presentation and in the investment digest in general but we hope we are able to provide interesting information and insights for you to do your own research and do your own decisions around crypto investments a quick word on

bitcoin swiss um i guess a lot of people know the company in zuk one of the pioneers 2013 until today a few of the numbers we're offering a range of services around crypto brokerage custody staking etc so if you're interested visit the website to learn more my area is research here is an overview of the publication we bring out so from left to right we have a few regulars on a weekly or bi-weekly basis which are the weekly rep and the decrypt we have a yearly publication

which is called the outlook and our newest publication that just came out a few weeks ago is the investment digest and i'm happy to introduce it tonight to you and we chose the title of blue chip crypto assets because we thought it would be interesting um to start a format that is also geared towards stratify investors with digesting and dissecting um the crypto space a bit more so in a sense the idea is to bring together all this information and and data people can find online about crypto

and distill a few bits we hope at least of knowledge and insight to help you make better decisions in this space so the new publication format is quite investor oriented compared to to the other periodicals we have it's as i said geared towards a trade fire audience so for the more advanced or more experienced crypto investors you may find a few basic in information that you already know but we also hope that you learn a few more things and and look at the different tokens we present and the different asset classes

in a different way afterwards we try to follow as much as possible with systematic approach but nevertheless it's first edition so we are very happy to receive your feedback um to that edition to make all the coming ones better let me start with asset classes so currently um the crypto space is considered to be one additional one new as a class some people even would say it's not yet an asset class i think we are we should go a step further and actually dissect this crypto space into what i would call crypto asset classes

because it's a multiverse um if you look at coin market cap or any other of the long lists of coins and tokens existing there are very different groups of tokens that behave very different form their own universe and so it makes a lot of sense to consider these groups clusters universes on their own merits so we would interpret these um different universes of in the crypto space um as asset classes with intra-class similarities so um as you can see on the right side cryptocurrencies um have different specific properties compared to smart

contract chains d5 protocols or multi-chains but there is no well there's no um um claim for completeness it's a first um proposal of how we could dissect this this crypto space um and i'm also sure we will we will um have quite a dynamic evolve involve development of these uh classes in the future so it's it's a start so let's jump right in um

we chose the term blue chip and the topic of blue chips um to give threat for investors who are new to the space and are facing this staggering long list of of different tokens and coins um to provide guidance and in tread fi a blue chip is as you can read here a recognized well-established and sound company you think of the dow jones the ducks the smi and other npcs around the world and you get an impression an impression what what blue chips are now the crypto space is very young bitcoin being the oldest is um 12 to 13.

um but i think it still makes sense to define blue chips in that space as well as widely recognized well-established and financially sound blockchains or protocols so we are not considering companies we are not considering c5 institutions in that space the first one may not be surprising at all um it's bitcoin the first earliest example of a coin and the project that started and established the entire crypto space it's been the best performing asset in

the decade 11 to 21 when you compare it with all treadfire and all other crypto asset classes or tokens or coins or shares um it's been the best performing asset over a decade it's now legally tender in two u.n states which are el salvador everybody has probably heard and the central african republic is the second one and finally for the ones who followed the space last year um the bitcoin network showed quite strong resilience when

china was spending bitcoin and particularly bending bitcoin mining and as you can see on the chart here which is also taken from the digest in [Music] summer of 21 we are not seeing the full the full fall but during this time the china the ban the mining ban of china was in full swing which led also to a drop of the hash rate so the hash rate is the sum of all computing power of all the computers that mine bitcoin and uh make sure the network is secure so it dropped quite considerably as well

but what this chart shows is the resilience of the network that only half a year six to nine months later the hash rate recovered fully and since then even with declining prices across the board has been increasing slowly but steadily ever making the network more secure we also for each of the tokens presented in the digest we are having a table with key metrics and a snapshot of what a snapshot of the metrics and an

overview of the ecosystem of the particular asset so here on in the bitcoin space as most of you most probably know uh the defining feature or one of the defining features is bitcoin's strict cap on the supply which is 21 million bitcoin units um and this particular monetary policy that leads to a decreasing inflation or more concrete new issuance rate which you can see on the top right which currently hovers around 1.76 on an annualized basis that is

still more than gold but after the next halving it will be less than gold because it will be half so 0.8 and that will be the first time an asset is actually more scars in terms of stock to flow ratio and the inverse issuance rate than gold so that will be interesting to watch in 2024 notable players in the bitcoin ecosystem um you may have heard of various forks of course other cryptocurrencies that are cryptocurrencies primarily notable companies are mentioned but what i want to highlight is is the

top section notable projects um because i have the impression that bitcoin is still viewed mainly as a payment network some say a failed payment network because you cannot do not buy your coffee with the base chain of of bitcoin because of fees and the 10-minute transaction time to those people i'd like to highlight the fact that there is a lot of development going on on layer 2 and layer 3 even in the bitcoin ecosystem so layer 2 of course is the lightning network which allows for immediate instant payments that are nearly free and

go without mining if you haven't heard about it i invite you to read on the bitcoin lightning network because many of the newest developments are happening on that layer notably layer three projects that try to bring digital asset aka tokens or smart contracts um to the bitcoin ecosystem mainly on layer 2. notable projects rgb and taro recently the next asset class is smart contracts and here we also chose or picked a

project everybody is aware of and knows it's the project has been inventing smart contracts a few years ago made the first real world implementation of of the idea of smart contracts it's the second largest permissionless blockchain after bitcoin and it evolved into a critical infrastructure for many many web 3 projects to date and of course this network is ethereum it's i looked it up this afternoon it's home to 50 000 erc tokens so you see 20 tokens are payment tokens that are implemented as smart contracts on the

ethereum chain so it's by far the largest smart contract environment in terms of developer attention resources flowing in projects tokens etc and it's the thing everybody is waiting for the upgrade to ethereum 2.0 or the the major milestone in in the upgrade to 2.0 which is the merge the move from the proof-of-work ethereum blockchain to the proof-of-stake chain probably happening in the middle of september what you also can see here in the chart is

a reflection of these many tokens that are built on on ethereum which is measured usually as the total value locked which as you can see is in the billions so the ethereum network is is actually securing quite a large amount of funds in the crypto space a few more metrics um which i'm not going going too much into detail um the interesting thing here is also related and connected to the merge um because the issuance rate will be balanced by a burn rate

um also of course after the merge and it will be interesting to see how the monetary policy actually will work out and develop there's a whole movement in the ethereum space talking about ultrasound money because the claim is that ethereum will be much more restricted than bitcoin is in the issuance of new tokens and um yeah people the people of the ultrasound money camp um expect that to be reflected in the price in the mid to long term notable projects in the ecosystem or

players what you also can see here in the top in the in the notable project section is there's quite some competition yeah being being the incumbent is is is a success story but ethereum is increasingly facing competition on layer one as well as on layer two in in terms of fees in terms of speed etc so it's interesting to see um how that will that competitive landscape will will play out what dynamics will play out after the merge

um and of course there are a few companies there more but but the the most relevant companies in that sense are consensus and infuria who runs a lot of the nodes the third group asset class are multi-chains we use the word multi-chains there's also talk about interoperability chains or interoperable chains we for the moment went with term multichain because i think it reflects most closely the idea of of projects like polka dot and as you can

see here cosmos and others um the idea here is not so comparing it to ethereum the idea is not to have um a blockchain as the basis of of all kinds of decentralized applications smart contracts and tokens on top but to have a much more decentralized and much more heterogenic up where the chain in the case of polka dot it's called the relay chain running with with dot the native token um that has the primary purpose of

connecting quite heterogeneous blockchains called parachains parallel for for parallel chains um and enable communication between all these different chains so interoperability is at the heart of the concept and polka dot is the largest of these multi-chain projects and as you can see on the chart um yeah over over 20 pair chains have launched so far and committed dot stake dot in in the process and you can see here the it's um yeah quite quite some money is secured

as well in the polka dot network already and as i said the important thing about bulk polka dot is the ability that these different para chains no matter what they do and how different they may be are able to exchange information in a secured way through polkadot's relay chain a few numbers again here you can see the issuance rate is close to fiat rates let's say so it's quite quite high compared to what we've seen before and of course the the notable space is the space of the different paragraph

paratrain projects they are around data availability iot nfts d5 of course smart contracts in general so there are many and it's a growing space um which allows for a lot of innovation on on layer one as well right so so the different projects um try to to build um either better versions of existing chains competing for example with ethereum here in the case of moonbeam and others but also trying very new things as well with the view of benefiting from a

larger network from the get-go finally the last asset class is defy protocols not chains because um yeah we don't have the d5 blockchain but d5 is happening mostly on layer 2 be it on ethereum or on other chains the dominant d5 player in ethereum and maybe also on different chains in the future is uni swap uniswap is a decentralized exchange which is one of the key use cases in d5 as you can imagine if you have a whole

universe of different tokens um you need a place that is decentralized trustless set up india according to the principles of of d5 and 3 that allows you to swap tokens uniswap is that place it's has been showing very stable development up to version 3 today and became immediately immediately famous um a few years ago when it when it um so one airdrop spread its native token uni into 50 000 wallets and was instantly one of the largest diva protocols from the start

and continues to be the largest also here a few metrics watch the issuance rate here so that's that's actually an interesting um metric um that you could uh investigate in in the blockchain projects you're interested in inflation is also a topic in crypto not just in fiat and yeah we have of course a few competitors that uh sometimes only play on the on the name sometimes take parts of the code

yeah but none of them has the relevance of of unisop all right with that i'm already at the summary because i'm not showing you the entire digest of course so half of the charts are still there and i haven't shown them i kindly invite you to in case you have not read it to read it here is a link for download i leave the page for a few seconds so you can take a photo if you like and maybe as an input also to the discussion i'm happy to to discuss and i'm interested in learning what the panelists think about this idea of crypto not being this one

asset class but being a multiverse and and having that its own asset classes and how you see the four we are proposing um and yeah first edition of uh the investment digest and there is for sure more to come and with that thanks a lot and i'm handing back to ian for questions let me switch off my yes thank you very much marcus for the short overview of the investment digest of course we generally invite everyone to read it in depth and learn from it

maybe just a brief question to start with i think i know some of you are thinking behind the digest but give us a little bit more insight into why these four particular categories if we think high level of crypto as a multiverse but why these four categories what were what were the the reasons or the criteria for that yeah i mean the first one is cryptocurrencies which is the asset class subsection category um that was the first in the beginning there was no other thing than cryptocurrencies um bitcoin was the first and then there

were several projects litecoin and others and forks of bitcoin um that all had the goal of allowing people to buy and sell and and hold these these assets as as currencies there was no talk and no possibility to do more with them than payments and store of value what you would expect from money by design so it's quite natural to to have this original first group um in there and then of course with ethereum and later on other projects the space diverged and became more heterogeneous

and again there was a first player in that case ethereum who said well let's take the idea of immutable transactions that can be used for payments and instead of putting numbers inside the transaction put a piece of code that then becomes immutable and can run in a decentralized fashion and let's think about what you can do with that idea so it makes a lot of sense to put smart contract chains into a bucket it's true that bucket is quite large um and at one point it may make sense to cut it in into more specific subsections maybe

um but for the moment i think it it's okay to to have it this way to also [Music] well yeah we also don't want to have asset classes to be very small which brings me already to to the next group uh which which at the moment we propose as multi-chains so the argument to have it is multi-chains are different to um i i explained it earlier it's different to in in in the smart contract space you have this one base chain that provides smart contract functionality and on top you're not experimenting with chains you just build

tokens and smart contracts and decentralized applications on top but you are sort of restricted to that chain and unless you you're not unless you don't unless you have bridges to other chains with all the um challenges that are connected to building bridges you're restricted to that space and the rules of that chain whereas in a multi-chain setup like with polka dot but also with cosmos you say okay we we we accept or we expect in the future that different chains will be around and they will be doing different things for for different

uh like fulfilled different needs but we still like them to be able to communicate and not have silos because it's economically it doesn't make too much sense and from a technology point of view it's a nuisance as well and so there the idea is to stay on the same level layer don't build on top of it but have them all on the same layer and and polka dot the volcano community is even talking about layer zero um indicating that the polka polkadot protocol is sort of below the paradigm parachain blockchains you can look at it this way or you can say they're all the same and just interconnected um

but yeah it's it's true it's um a much smaller group of of projects um than the smart contract group is and of course they also use smart contracts you could also enter them into the asset classes as class of smart contracts for the moment we think they behave and have it behave differently and have a different dynamic to homogeneous smart contract or monolithic smart contract chains but yeah also happy to hear what the panelists think afterwards and finally defy i think it makes a lot of sense to have d5 as its own asset class in the sense of these are transfers of traditional financial

instruments into the decentralized world many of them happen on ethereum but not only there's smart contracts on other chains as well so so the word defy alone doesn't imply necessarily ethereum for the moment it's very often ethereum but it doesn't have to and inside d5 of course you have different types of instruments decentralized exchanges our group lending protocols are group synthetic assets r group and then there are more um in the case of if i at the moment we didn't want to go into one step

deeper because it's it's still a very um a very dynamic space and and the uh how to say the landscape is moving quite quite fast um stuff that was there and was huge is gone a few weeks later as we have learned two months ago with with certain stable coins so yeah it doesn't make too much sense at the moment i would say in terms of maturity of the d5 space itself to go very much into the detail in the into some sections of it and then again uni swap is a very stable a very old quote-unquote

protocol in the space performing a a crucial function and doing it well so it was a yeah it was a good or clear choice for us to to pick uni swap for that what we haven't shown just to really answer the question fully what we haven't shown we are not talking about nfts for example we are not talking about metaverse and also a few other areas um nfts for all the the hype and all the the experimentation and everything that's going on in the nft space having a cluster or an asset class that we would call nfts doesn't make too much sense to me

in terms of of how to structure the space because an nft is not it's not the user perspective we are taking right an investor does not invest in nfts they invest in maybe pieces of art as nfts maybe in protocols that do something else with nfts like ticketing or gaming or land whatever but then the nfts behave differently so nft is just a technical term for a type of token and i think that doesn't work for uh for an asset class understood thanks for the in-depth overview on that i'll give you one follow-up question from our audience one

of our very engaged um shall i say bitcoin focused uh community members talking about uh a blue chip crypto asset if you would define it as a financially sound blockchain how is it that ethereum where the issuance rate and the supply is not fixed could be considered a blue chip crypto asset and that leads into maybe the follow-up question and then we'll jump into the panel discussion is it just about the asset as uh as an asset with its financial policy or in the crypto space and this is something which may be new investors professional investors from trade phi

coming into the space have to understand that there are more technical factors uh ecosystem factors and and network factors that uh play into the value of a token beyond just the protocol level financial system yeah lucas great question um so for the moment and i agree with with the the the um how to say the skeptical view of of the question um it is true that we are not 100 sure how the monetary policy or the effects let's let's put it this way the effects of the monetary policy

um will be playing out and for example let's say summer next year um let's assume the merge takes place it's successful like no technical problems etc and and we're moving on um there are a ton of simulations for all kinds of possible developments that's that's true but we are not really sure how it works or how it will be really playing out but at the same time looking at all the smart contract chains at the moment um ethereum has beha has been behaving reasonably sound in terms of monetary

policy so far sure um with every heart monitor with every but every other hard fork parts of the monetary policies have been changing that is true but that's literally the case for nearly all the chains except bitcoin and yeah so so so it's not about competit and that's also a point about um talking about asset classes um we are proposing these these grouping to discourage at least to certain extent comparisons between asset classes so comparing bitcoin with ethereum which

many people like to do a lot um maybe it doesn't make so much sense because it's two different things um as the questioner in implied um have different properties not only technical properties but also economic um properties and and serve different purposes um there's a reason why no country in the world chose ethereum as as a cryptocurrency as legal tender right but nearly all projects that go about writing something around smart contracts have some idea for some decentralized application have been using ethereum and at least so far

the monetary policy hasn't been preventing them or has been breaking down etc um i agree it's it's not the same as as the same stability and and predictability and as we would like to see but let's also see what the competition does right so ethereum is competing with other smart contract chains and if people users realize that there are differences in monetary policy and it makes a difference on which chain you are with your project or the app i would just say the market will play out and just because we took ethereum now as

the the blue chip in the smart contract chain space doesn't mean it will stay there forever right if the assessment changes because the project changed and and i mentioned layer two and three in the bitcoin space so there's also stuff going on um let's see but for the moment i think we we are okay with with um with the way we did it yeah very good with that i'd like to open up the panel discussion we have two great guests with us today as mentioned already first of all dr demelta hayes she is director of research at coin telegraph and also crypto portfolio manager at celtner and

co as well as alexander thoma who is head of digital assets at post finance so let me throw the question out based on what marcus showed and the discussion and q a so far um we talk about different asset classes within the new and developing crypto asset class how far or how sophisticated do you think professional or traditional investors are in understanding this space and i would maybe start with alexander since you shall i say represent a more traditional financial institution here in

switzerland which also is getting into this space we won't dive too much into the details of that but obviously post finance has an interest in crypto assets digital assets how much do you think people understand this and how much do they need to understand in order to invest in crypto assets okay uh thank you also from my side i hope you can hear me um all right great so uh good question for the start i think that um [Music] you know when we think about crypto as an asset class or or in general crypto assets as an asset class i think that's about to sink in really into traditional

finance and i don't think there's any bank in switzerland that is currently not discussing the crypto topic at the very top management so um therefore i think it all starts with adoption what i don't think uh mains what is yet mainstream is the view of marcus regarding the four different kinds of asset classes within the asset class of crypto i think that is maybe a little bit next level for the mainstream investor i think that traditional finance investors view this as the fifth asset class but then just make a distinction

between different kinds of cryptos with different kinds of flavors and they would i don't think that they wouldn't they would sort of coin the term sub as a class as as they wouldn't do that for stocks as well i think just as it is with stocks they're just different types of sectors for instance and and then we just derive a sector allocation with all the cryptocurrencies that are out there does that make sense yes yes and maybe just the follow-up question i mean now jumping into the space you've seen obviously some demand or some appetite for this uh with with post finance where does

this come from does this come from more professional investors or retail investors do you think this is an add-on or or a real strategic shift for your clients yeah so it's it's actually twofold so i would say first and foremost we identified digital assets and cryptocurrencies in in specifically right um as a strategic focus field i mean we we we use the term digital assets but what we actually mean is crypto assets right we just subsume cryptocurrencies under that so um we see that as a very strong field going going going into the future and we

believe in the in the fundamental technology behind it and the various use cases that they bring so um we want to position us ourselves as post fans in that market and on the other hand we have a lot of push from clients that want to access to this market at their house bank this is what we what we really see so there's a need for services around crypto and products around crypto that our clients have and that they want to sort of like fill that need but with us actually to be honest right so um

they see crypto on investments in crypto as um any other financial activity that they do right like investing in stocks and so on and they just want to do everything at the same place i mean of course there are like outliers or let's say 10 percent of people that still want to do this stuff uh on their own with self custody wallets and go to exchanges that's fair enough right i'm one of those 10 percent but let's say the 90 of mainstream retail investors wants to handle this at their bank and this is where we come in

having 2.6 million clients in switzerland that's quite impressive that's a lot of clients to be sure do you just follow a question just out of curiosity do you do you provide advice or guidance or education for the clients or would you plan to do that going forward now we're going to start with a execution only offer but education is a hot topic inside our organization both internally and externally and we want to provide something um in terms of education to our clients as well

but it's too early to to announce anything specific but then we will come up with something uh very interesting and and also um that will be of great value to our clients i'm sure you will and we'll be looking forward to that let's turn over to quickly to demelza um you are focused um on core crypto topics with coin telegraph but also more shall we say traditional financial products with uh with the amc with telcon and co that has quite a a broad basket and composition but but stepping back um when we think about a maturing crypto

asset space which can be now brought to the public in financial products like this do you think we are already at a tipping point where the crypto asset space is bankable in that sense and if not what else would need to happen for that to be the case well good good question ian and thanks a lot for your new research report dr dapp it's it was a good read and yeah to get to your question well i think that you know we've seen blackrock announce that they're going to come in with a a private trust for their institutional clients and i think that blackrock did this after there was

regulatory clarity in the u.s and i think that over time you know as there's more regulatory clarity so for example um you know uh gary gensler at the sec has has said that bitcoin and ethereum are not securities and i think that there's you know it's it's it's our job to educate investors that these these aren't securities and that um they you know there's more and more regulation um across uh europe and and uh in asia and and north america to to bring clarity and confidence to the large investors and i think that as that you know continues to become a

stronger um i think that more more investors with with uh institutional status will come into the space so i think you know we we are seeing a great uh a a great position for cryptocurrencies um one of the things that we're doing at coin telegraph is we're doing a survey of professional investors and we did this two years ago and at that point we had 36 percent of investors saying that they had invested in crypto professional investors and now it's up to 44 percent um however regulation is still one of the main reasons for the uh people that said no so i i think that regulation clarity is is a big topic um

for for institutional investors okay and and i'll continue with you develop said just just diving down more into the financial instruments which you are managing there i took a look at the portfolio allocation today uh online very interesting that i think it is 21 bitcoin very interesting number there uh 15 ethereum as well as altcoins and some other things when you think about what marcus showed from our investment digest as far as different asset classes and blue chips how was that decision made for the

composition of the amc which you're managing great question as well so i i do think you know talking about dr dap's categories i i think that that he's on to something here because you know there's different correlations between the tokens within within cryptocurrencies and we've seen in our portfolio that on some days for example uh compound and maker in the last week um didn't perform very well they're in dr dap's defy category but on the other hand um bnb you know build and build binance token and um and solana both performed very well this past week and so we saw that kind of the layer ones uh with with smart contract

capabilities did do well this week so i think that you know you have you know it would be interesting to study the correlations between these different groups um that dr dapp has presented and i think that you know within our own portfolio i like to look at the different revenue models of these tokens um so for example you know you have this thin and fat protocol thesis and i think that you know the idea is is that if you take the internet as a technology stack you have you know tcp and voip um kind of as these bottom layer technologies that these applications like facebook or skype are built on top of and in that

thesis they basically argue that the bottom layer protocols did not garner that much investment whereas the applications built on top of tcp and and voip um they are the ones that attracted a lot of capitalization and investment from investors and also they had a revenue model that that you know they could they could have revenue streams from customers on the other hand uh cryptocurrencies we in my opinion we've seen the opposite so far so we've we've seen these protocol layers that have attracted large capitalizations like ethereum um bitcoin um polka dot et cetera and then the application layer on top um for example uniswap or moonbeam they have attracted

capital as well but not as much and so i think that you know looking at kind of the the flip between you know the internet and the web and and um blockchain technology i think is interesting um as a way that we've kind of categorized it and i think to that point for example tokens like uniswap or um you know b and b i i think that they kind of represent exchanges and exchange activity and i think that that's a uniquely different um revenue stream and business model than other cryptocurrencies um that that might be you know focusing more on utility or medium of exchange

um and and payments so i you know i i think that there's definitely something here as it can and you know the answers to this discussion and this question and this research will help portfolio allocation because we we will be able to understand better the relationships between these coins and and how they add diverse diversification benefits and ultimately increase the risk adjusted return so i think i think it's a great it's a great research piece and and deserves a a lot of attention and maybe some statistical analysis to um to investigate these relationships further and marcus what what would you say just building on top of that the the base layer

uh focus versus the application layer focus would you say that's generally been true there's been more interest obviously they've been developed first versus the application layer coming second in the development timeline but uh do you think that is that is a fair thesis to think about i like the idea actually um to say um it doesn't matter too much whether on which layer we are but which function we perform um you you give the example of an exchange um yes i can see that and and it sound yeah intuitively it sounds logic

and and and a sensible way to to proceed but layer ones and layer twos are not the same thing right there's dependency um there is there's different risks not not maybe not financial well by implication it's a finance financial risk but there's technical risk um because layer two is it's much newer technology or actually we we have a bucket of different technologies that are currently in live testing and experimenting i i think that's fair to say and we'll see which which ones survive

and we kind of would lose i mean i think we have to consider this as well um so so putting all the taxes in one bucket because they are taxes makes sense but also ignores some of the i would say important differences in in the risk as you said like risk adjusted returns so we need to consider this as well but but i like the idea in general to go by function rather than by um yeah by layer or whatever the alternative would be yeah and and of course i agree to the

to the uh argument with the correlations and and statistical uh support for for um to strengthen the the structuring of the classes as well as the groupings of the tokens coming back now to alexander um there's a lot of deep stuff here shall we say also in in the technical side of things how do you plan to explain this to investors from finance who are going to invest in this space or are you going to keep it very high level just bitcoin and ethereum isn't there a saying never invest in

something you don't understand oh yes for that too many people are in crypto good so um no i mean there's a more high level more straightforward way to explaining at least the basics i mean what we're talking about here regarding portfolio optimization and i think that's that's not a run-of-the-mill education level right i mean that's next level for us nerds in this space but i don't think a client needs to understand this i mean he doesn't understand this with the other asset classes as well how his portfolio is compromised how the

backbone is set up regarding the portfolio optimization if he has for instance a digital uh asset management solution that that has a fund that invests in different kinds of asset classes he i don't think that the normal run-of-the-mill investor understands this and wants to understand this he just wants to trust his or her asset manager in that sense that he takes care of his or her money so let's turn back to an asset manager the meltzer going back to to the portfolio that you manage for cheltenham co the altcoins which make up a certain percentage of of

that product what what are they and and uh how did you choose those are they some of the ones which are in the blue chip uh grouping here or some others we do have all of dr dapp's blue chips in in in the portfolio um and and uh yeah basically when i used to manage the alternative investment fund in liechtenstein we were quite limited in what we could hold directly now that we have this new product set up our universe opened up a lot and we wanted to be able to you know gain exposure to a lot more coins

that have interesting opportunities and yeah so far um you know we've we have outperformed bitcoin by 40 um we also are up 26 and in just the two months that we've been live and uh the coins the the way that we chose these coins is we use various different tools but um i really like using the ties sig sig dev which is their significant development terminal and that they you know are one of the only if not the only platform that has full access to the entire twitter um feed of data so most platforms only have little snippets of data that they

analyze so if you see like a twitter sentiment score it's mostly gonna be like up to a hundred thousand tweets that that they can afford but when you get the full access to tweets you know it's it's you're talking about you know hundreds of thousands of dollars worth of data from twitter each year and they have a special contract so i i use a lot of analysis of twitter itself for screening new coins and and making trades i also um look for example at what what's going on with coin telegraph so i think that you know a lot of investing is based on for cryptocurrencies is based on the teams behind these coins so i you know try to get

a call with developers i try to get a call with the people um that are managing the coin um you know for example with polka dot you know reaching out to the web 3 foundation speaking to them or for example with moonbeam you know i i was i knew about glimmer before it had even been announced just because i was you know working with glimmer and moonbeam on various projects at cointelegraph so i like to like for example gnosis safe and their transition away from you know the prediction market towards the you know the safe and decentralized you know custody and stuff and so i i like to follow these projects and really you know have conversations with them one-on-one um screen screen for them and then once we get them in we do uh just like dr uh

proposed we basically try to work with the correlation between these assets so i've i've seen that you know as bitcoin has a run um traders take gains they invest them in other interesting projects as those interesting projects uh have a good have a good uh run they then you know buy back into bitcoin and and stack more sats as they say so i i've seen a natural ebb and flow between bitcoin and the altcoins and so we've really tried to use um you know dynamic rebalancing within the portfolio based on back tests to understand when we should um you know move in between and and importantly

rebalancing is important i mean if you if you look at the bitwise study uh which we replicated um and and brought up to to reset time so up to up to the data to the end of uh june for 2022 rebalancing greatly improves your your risk adjusted return and that's that's if you do it yearly monthly if you do it based on when it hits a threshold like 50 it doesn't matter as long as you rebalance um that your risk adjusted return improves dramatically from from just holding hodling so uh so i i think that you know overall we we basically screen for tokens and then

we make sure that we're rebalancing and that has really um helped us the other thing that really helped us is that we used market neutral strategies so when the when we all the indicators that i was looking at when we saw that we were when i you know basically felt based on the data that we were going to continue to decline we were market neutral and had um you know we were using cme options trading to basically generate premiums and we were not going long so when there's a downturn we do not go long we take action and we basically collect market premiums which are very profitable um and they have

been for for years now on the cme which you know chicago mercantile exchange it's one of the most regulated options markets um and you know if you if you just sell at the money covered calls or you sell um at the money puts if you want to build a position um when when bitcoin in order to try to take take advantage of bitcoin's volatility uh the premiums can be you know between three percent and five percent per month um and you know you annualize that and you're looking at returns that they can put many traditional you know trad fi trade fi products you know out of out of business and these are these are you know essentially risk-free because you don't

have um you don't have a long position you're you're hedged so i i think that you know there's a lot of opportunity um and especially now that the market's turned around um i think it's it's a great great great time to be looking at crypto um and uh and and i and i i'm generally optimistic about not only bitcoin but but all the layer ones and and all the dapps that are really providing a unique use case may i ask a question here um if i may and um you have so you mentioned the message you mentioned the range of approaches you you follow for for the selection process

you haven't mentioned any on-chain metrics um you could measure i mean all kinds of things right active addresses the bitcoin space is full of more or less fancy um metrics on chain is is that an area you look into or you use or not or not yet and what's uh thinking behind well we do use glass node and coin metrics um where we're connected in and we do you know i basically at cointelegraph i have to maintain some dashboard um of analysis on these metrics but on the other hand there can be a lot of manipulation

and noise of on-chain data and so you know for example with like for example tazos um i i like jesus i'm a big fan but for a while there was a lot of on-chain data and a lot of people thought well is tasos you know really being used at more so than other blockchains because the growth in on-chain transactions was enormous um but when i dug into the data it turned out that a lot of transactions were occurring because of governance and that when you do a governance um uh proposal and voting there's a lot of on-chain activity but not as much economic activity and so i think that when you look at these on-chain metrics each token has its own little

idiosyncratic uh variables that you have to account for like for example on dash you have to account for on-chain mixing for bitcoin you have to account for change transactions right you know i mean so each blockchain has its own transactions that you have to you know clean up the data first and then you can begin to compare and so i do look at those as well um mostly like you said active user addresses that's probably one of my my top um favorites um and then i love all the um i love all the multiples that allow us to see where we're at in the overall market so for example you know the mayor multiple uh the 200-day moving average you know i like to see all the ones that let us

know are we below 200 a day are we above 200 day where are we at so i think that those are are helpful for me as well very good i'm going to bring one question in from the audience and then we're slowly going to wrap up our conversation but this moves into perhaps looking to the future marcus one question is about competitors to ethereum in the smart contract space and of course um there are more in the space whether it's uh cardano or as mentioned here binance smart chain and others will you be looking at those as well in more detail and

can you give us some insights about how you'll be looking at that and what what you'll be looking at for the next analysis so there will be a next digest this is sure we haven't decided yet on which yeah which but yeah it's also um so the plan is that this first edition sort of shows the landscape and and with with future editions we would like to go into specific areas um and go go deeper um if that is the smart contract

ethereum and competitor space um i i cannot tell yet we haven't made that that decision yet um but for sure it's a large space and there's a lot a lot of activity and a lot of um also discussion going on right now not only but mainly also because of ethereum's upgrade process where you sometimes think everybody's just watching the merge and nothing else so yeah we will we will continue and we will also go into follow this while i said putting asset classes or sub classes or make sense

and it doesn't make too much sense to compare between them it makes a lot of sense to compare of course the the components inside um and we would like to follow um a comparative approach in in future digests when we look into a specific asset class in more detail um yeah but beyond that i'm i'm not able to give details um right now um so sorry to say but there's a quite so let's say among the top three there would be the the topic of smart contracts okay one more question from the audience thinking about different ecosystems as kind of foundations

um you know would it make sense to to superimpose on top of that analysis of of the application economies um you know with rgb on top of btc and so on and so forth units went off of eth um would would that be a a logical way to analyze asset classes with the interconnections perhaps or is that a little bit too in-depth i'm not sure if i understand the question um so so the idea would be to to take so the layer one plus a layer two in combination i believe if i understand the question

ah sorry i now i see the question thanks [Music] for example yeah um you can do that it's just difficult to not not do it basically arbitrarily right um so you have very not always but but often you have different layer two solutions so for example in the ethereum space quite quite a bit of different roll-ups uh roll-up concepts are currently competing with each other which is done on purpose even um by the which i think is great and a a great

idea um it adds quite some complexity to the space uh to to the analysis if you if you take this um and and any choice is even more you you need i mean it's hard to defend the choice uh you make a combination choice between between a layer two and a layer one so i would say maybe a few years down the road when the space has matured and we are not discussing are there asset classes or are they subclasses or are they different but we have a common understanding and a common agreement

among them and then go a step deeper maybe we reach a point where we would say it can make sense to look at ecosystems um but to be for example because bitcoin rgb was mentioned um maybe projects also change um the asset class they switch because they evolve and they offer different functionality to what they offered in the past and then it's not necessarily and then of course you take the entire stack because only the entire stack offers the functionality it does and and then

i would go with the melsas approach and say okay which function is performed right is it is it tokenization of assets that's now possible on that layer two or three or is it whatever it is right but then you would consider the base layer because the base layer is still a different one to a competing token or project and i would agree if if that was also part of the question i would agree that different base layers i mean it's a difference whether i have d5 on solana or have d5 on ethereum or define something else because the security and the

design architecture of the base layer decentralization scalability security plays a role even if the functionality on the higher level higher layer is essentially the same um yeah but it's it's it's something like quite advanced i would say for the moment wait and see the final question just to just to alexander um you you are i'm sure looking at all of this and bringing it all together and going to put together a very in-depth education program for the with a 2.6 million clients from post-finance who are now going to

invest in crypto assets right yes so of course only those that want it i mean we cannot force anyone to participate in the education but we can surely try and we will do our best of course there are other examples of banks who include a education part for the you know the main base of the clients and some do it very successfully and and i think they yeah they that's the goal right to have a good education that is fun and easy to do it really brings value

i can i can without giving away too much information say that i am a client of post finance i look forward to the offering and the digital experience where i can learn even more about crypto through the app or through the web portal it would be actually very interesting to see and uh wish you lots of luck on on putting that together and building it out with that thank you i think we're going to wrap things up we're just after seven o'clock very interesting discussion thanks for the insights thanks for the presentation marcus and as mentioned as a short teaser there will be a further edition of the bitcoin swiss investment digest you can find it for download on our main webpage

bitcoinswiss.com and in the meantime do your own research as well and nothing which has been said today is considered investment advice of course but uh let's keep watching the space look forward to also what happens with ethereum and ethereum two coming up perhaps more information coming out on that very soon thanks again to our panelists alexander to melta marcus and with that wishing you all a very good evening and best of luck in the future thank you thank you ian thank you marcus and the melsa thank you all to the guests