- As insurance against a full-blown monetary meltdown in the same way as gold.
- As a fintech and labour force management investment disrupting global financial and labour services.
- As an ecosystem in which NFTs have use value as a new type of functional good.
My view is that it is wildly overpriced as an asset class unless it achieves the three above.
What I say to people is that even if it fails in all ways, understanding crypto will mean you will better construct the rest of your portfolio to avoid the disruption.
So how did we at MH Carnegie perform as we put our toe in the water? In our first year of operation, our balanced fund returned approximately 37 per cent. We aim to capture 80 per cent of the upside of crypto while insulating against 40 per cent of the downside, and I think we achieved it.
I don’t want you to think we feel smug, as plenty of other funds performed better. To achieve our returns, we had to establish a DAO (decentralised autonomous organisation) in record time and explain to our investors that we had made a major investment in something called “smooth love potion”. And if that wasn’t enough, we have been exposed to two hacks indirectly despite a seasoned team. Finally, despite forgoing profits by avoiding the protocol, a tether blow-up would still put us (and all of DeFi) in intensive care.
It is only after you have worked out the best compromise on security and custody to avoid losing money that you can start to worry about making it. All along the way, our investment committee members have constantly disagreed about almost every investment we have made because those choices are so complex. After a year, all I can tell you is that crypto is a ‘stress-on’ asset class.
Now Ian Love, whom we have an affiliation with and has a different approach to us with far less DeFi, performs very well and lives a much less stressful life than us; but perhaps it is because he has been doing it far longer.
I have a small part of my money invested in this asset…
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