On November 19 Cole-Frieman & Mallon hosted an event for managers and investors in the digital asset and cryptocurrency space. Below are notes from the panel discussion.
Many thanks to all who made our event this week such a success, especially Moderator, Michael Arrington (Arrington XRP Capital) and Panelists, Aram Verdiyan (Accolade Partners), Brooke Pollack (Hutt Capital), Thomas Chladeck (Diginex), and Nabeel Qadri (Protocol Ventures).
Discussion was animated and at brief moments entertainingly off topic but within our hour-long panel we touched on many core issues:
- Allocators must answer to their own investors/limited partners – currently demand (from endowments, institutions, family office, etc) for digital asset products is not high.
- We discussed the Bitwise study on allocating crypto in an institutional portfolio. While that study makes clear the potential positives, the panel was divided on whether exposure to digital assets should be done through FOF vehicles or simply through holding bitcoin at one of the large custodians (Coinbase Anchorage, Fidelity, etc).
- The panel discussed a broad spectrum of digital asset investment styles – from VC type strategies to long tokens/protocols to trading strategies, acknowledging there are pros and cons with each. Ultimately panelists were split on what the right mix might be and opinions were informed by their time-horizon preferences.
- Opinions varied on portfolio construction. Some believe that protocol layers are the correct play and that businesses will eventually be built on the protocol layers. Others believe the industry is so much in its infancy that the bets need to be placed on development teams/companies who can develop and pivot as necessary.
- The panelists agreed that manager pedigree is an important measure of due diligence and the allocators will generally look to a manager’s understanding of the space, their technical capacity and knowledge, and their historical presence in the space. One panelist noted it is not uncommon to find managers with 5-6 year portfolios.
- The topic of timing was big – many of the panelists did not think they had the ability to specifically time the market and that all investments in this space should really be focused on the long term prospects of the industry as a whole.
- Everyone seemed to agree that the digital asset space is waiting for its Lotus123 moment. As of now it appears Bitcoin is both the religion and killer app even as there are various trends which pop up from time to time (DeFi as the trend right now).
Bart Mallon is a founding partner of Cole-Frieman & Mallon LLP. Cole-Frieman & Mallon has been instrumental in structuring the launches of some of the first digital currency-focused hedge funds. For more information on this topic, please contact Mr. Mallon directly at 415-868-5345.