Crypto & Asset Management PDF

[[Chapter 5: Crypto & Asset Management]]{.smallcaps} ================================================================ Introduction ------------ - \"The time to buy is when there\'s blood in the streets.\" - Baron Rothschild What is Asset Management? ------------------------- - Investoped...

[[Chapter 5: Crypto & Asset Management]]{.smallcaps} ================================================================ Introduction ------------ - \"The time to buy is when there\'s blood in the streets.\" - Baron Rothschild What is Asset Management? ------------------------- - Investopedia: \'Asset Management (AM) is the practice of **increasing total wealth over time** by acquiring, maintaining, and trading investments that have the potential to grow in value.\' Types of Asset Managers ----------------------- - Main types of asset managers: - Registered Investment Advisor (**RIA**) - **Investment broker** - **Financial advisor** - **Robo-advisor** How Asset Management Works -------------------------- - Asset managers generate revenue by **charging clients fees** based on assets under management (**AUM**), performance, or transactions. Fees include: - Management fee - Performance fee - Transaction fee - Custody fee - Exit fee Asset Management Strategies --------------------------- - Strategies depend on the **client's risk/reward preferences**. Common strategies include:\ **Active vs Passive** management\ **Growth vs Value** investing\ **Balanced or Hybrid** approaches\ **Socially responsible** investing\ **Tactical vs Strategic** approaches Diversification in Asset Management ----------------------------------- - Asset managers diversify their portfolio to manage the **level of risk** linked to each asset class. All investments have an expected R/R ratio. - Diversification **reduces risk** by spreading investments. Strategies include: - Determining correlation between assets - Diversifying across asset classes (e.g., stocks, bonds) - Diversifying within asset classes (e.g., sectors) - Geographic diversification - Alternative investments (e.g., real estate, crypto) Types of Funds -------------- - To implement the different strategies, asset managers create **dedicated vehicles/investment** funds: - Asset managers utilize various funds to implement strategies: - Monetary funds - Fixed income funds - Equity funds - Mixed funds - Alternative Investment Funds (AIFs) - Exchange Traded Funds (ETFs) Crypto Asset Management ----------------------- - Crypto Asset Management involves **managing digital assets** like **cryptocurrencies**, NFTs, and protocol tokens to grow portfolio value. Strategies include: - Holding (\'HODL\') - Trading - Staking - Dollar Cost Averaging (DCA) - Yield farming Asset management ---------------- Pros: - Expertise and knowledge - Time saving - Diversification and strategies - Risk management Cons: - Cost/Fees - Performance is not guaranteed - Potential conflicts of interest (e.g. products) - Limited control/distance from investments Crypto AM Strategies -------------------- - Diverse crypto investment strategies address **varying risk appetites** and **objectives,** shaping how investors navigate the dynamic digital asset landscape: - Holding ("HODL") - Trading - Staking - Initial Coin Offering (ICO) - Dollar Cost Average (DCA) - Yield farming, etc. CEX vs DEX ---------- Access to CEX and DEX --------------------- - **Centralized Exchanges**: - Online registration (app or webpage) - KYC checks (ID and selfie) - Final approval - Ready to buy and sell crypto - **Decentralized Exchanges**: - Connect your Web3 wallet - Ready to swap crypto NFT Market place ---------------- - An NFT Marketplace is an **online platform** that allows users to create, sell, and trade NFTs. Utilizing blockchain technology, these platforms support a wide range of NFTs, enabling artists to earn from their digital creations. - CEXs and DEXs (incl. NFTs): Finance, Coinbase, Pancakeswap, etc. - NFT Marketplaces: - OpenSea - Rarible - Magic Eden, etc. Web3 wallets ------------ Investopedia: "A cryptocurrency/web3 wallet is a **digital wallet** that allows you to store the unique digital codes needed to send and receive **crypto assets**, such as Bitcoin or Ethereum." Main Web3 wallets: - Meta Mask - Trust Wallet - Ledger Live (with Ledger hardware wallet) - Trezor (with Trezor hardware wallet), etc. 15. Hot vs Cold wallets  DEX Exploration --------------- - Decentralized Exchanges offer a **myriad of products and services**: - Spot/Leverage trading - Liquidity pools (farming) - Staking - Initial DEX Offering (IDO) - On-/Off-ramp solutions, etc. Asset Tokenization ------------------ - Chainlink: "Asset tokenization involves representing the **ownership rights** of real-world assets as **digital tokens** on a blockchain." - 2 categories: - Real-world asset tokenization: Equity, currencies, bonds, credit, RE, art, commodities, etc - Digital asset tokenization: Only digital, NFTs, DAO rights, metaverse, gaming skins, etc. Tokenization benefits --------------------- - The tokenization process transforms assets into **fractional, tradable units** represented as **digital tokens** that can be purchased, sold, or exchanged on the blockchain. - Main benefits: - Increased liquidity - Enhanced accessibility - Transparency and security - Cost efficiency - Speed Market size ----------- - Asset tokenization is a trillion \$ market. The total size of tokenized illiquid assets, including real estate and natural resources could reach **\$16.1 trillion by 2030**, according to the **Boston Consulting Group** (BCG). Portfolio Management and Market Sentiment ----------------------------------------- - Portfolio management strategies evolve with market trends and sentiment. Key considerations include: - Bitcoin halving - Macro factors: inflation, rate hikes, geopolitics - Risk management: addressing volatility, regulatory and liquidity risks Risk management --------------- - Asset managers that are offering exposure to crypto assets must closely monitor and anticipate the following risks: - Volatility risk - Regulatory risk - Security risk - Liquidity risk - Custodial risk - Market sentiment risk Conclusion ---------- Asset management, particularly in the crypto space, is a dynamic field requiring strategic diversification and risk management. By leveraging innovative tools like tokenization, managers can expand investment opportunities.