Jeff Dorman, a CoinDesk columnist, is chief investment officer at Arca where he leads the investment committee and is responsible for portfolio sizing and risk management. He has more than 17 years of trading and asset management experience at firms including Merrill Lynch and Citadel Securities.
Investing in digital assets is a sham! Participants in this industry are simply trying to anticipate price movements, rather than use fundamental analysis to determine why a token or coin might go higher or lower. There is no intrinsic value. It’s pure speculation based on technical analysis. It’s outright gambling.
It’s also exactly how stock and bond markets traded for the first 300 years.
In 1602, the Dutch East India Company issued the first paper shares. This exchangeable medium allowed shareholders to conveniently buy, sell and trade their stock with other shareholders and investors. For hundreds of years thereafter, investors and traders did their best to anticipate price moves, without any of the tools available today for valuing these securities. Back then, a stock trading at $100 was viewed more expensive than a stock trading at $10, independent of number of shares outstanding, underlying revenues, or business prospects.
It wasn’t until the 1920s, following the stock market crash and the Great Depression, that two Columbia Professors (Benjamin Graham and David Dodd) came up with a methodology for identifying and buying securities priced well below their true value. Their book, “Security Analysis,” was published in 1934, and Graham and Dodd’s principles provided a rational basis for investment decisions that are still applied today by the world’s top value investors.
Warren Buffett chose to attend Columbia specifically to learn from Professor Graham (and received an A+ in his class). Almost 50 years later, Professor Frank Fabozzi introduced similar valuation…