Institutional Investment in Crypto: Top 10 Takeaways of 2019

This
post is part of CoinDesk’s 2019 Year in Review, a collection of 100+ op-eds,
interviews and takes on the state of blockchain and the world. Scott Army is
the founder and CEO of digital asset manager Vision Hill Group. The following
is a summary of the report:
An Institutional Take on the 2019/2020 Digital Asset Market”.

No. 1: There’s bitcoin, and then there’s everything else.

The
industry is currently segmented into two main categories: Bitcoin and
everything else. “Everything else” includes: Web3 innovation, Decentralized
Finance (“DeFi”), Decentralized Autonomous Organizations, smart contract
platforms, security tokens, digital identity, data privacy, gaming, enterprise
blockchain or distributed ledger technology, and much more.

Non-crypto natives are seldom aware that there are multiple blockchains. Bitcoin, by virtue of it being the first blockchain network brought into the mainstream and by being the largest digital asset by market capitalization, is often the first stop for many newcomers and likely will continue to be for the foreseeable future.

No. 2: Bitcoin is perhaps market beta, for now.

In traditional equity markets, beta is defined as a measure of volatility, or unsystematic risk an individual stock possesses relative to the systematic risk of the market as a whole.  The difficulty in defining “market beta” in a space like digital assets is that there is no consensus for a market proxy like the S&P 500 or Dow Jones.  Since the space is still very early in its development, and bitcoin has dominant market share (~68 percent at the time of writing), bitcoin is often viewed as the obvious choice for beta, despite the drawbacks of defining “market beta” as a single asset with idiosyncratic tendencies.

Bitcoin’s
size and its institutionalization (futures, options, custody, and clear
regulatory status as a commodity), have enabled it to be an attractive first
step for allocators looking to get exposure (both long and short)…

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