Webinar 16.09.2019 Warum Blockchain & Crypto Assets ein Bestandteil der auf die Zukunft ausgerichteten Asset Allokation eines Family Offices sein ...
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Webinar 16.09.2019 Warum Blockchain & Crypto Assets ein Bestandteil der auf die Zukunft ausgerichteten Asset Allokation eines Family Offices sein sollten
L1D introduction
L1 Digital AG
• Zurich based investment adviser for multi-manager solutions
• Captures investment opportunities in disruptive blockchain industry
• Operated by experienced investment team that built up $6bn Harcourt
The Team
• Started investing in the space in 2015 (tokens, directs, funds) via Bellegarde family office
• Vast network of blockchain projects across the globe; 150 funds analysed
• Highly complementary team with proven business building and investment track record
>100 years of combined financial markets and crypto experience
2Everyone talks about Bitcoin but there are 1000s of other projects
Top 20 cryptos by market cap ($m) BTC USD price
1 Bitcoin 181’949 100,000.00
2 Ethereum 20’090
3 XRP 11’478
10,000.00
4 Bitcoin Cash 5’539
5 Litecoin 4’566
6 USD Tether 4’060 1,000.00
7 Binance Coin 3’953
8 EOS 3’282 100.00
9 Bitcoin SV 2’376
10 Stellar 1’371 10.00
11 Monero 1’366
12 Cardano 1’275
1.00
13 Unus Sed Leo 1’177
14 TRON 1’161
15 Dash 809 0.10
16 Ethereum Classic 781
17 Tezos 737 0.01
18 IOTA 722
19 Chainlink 719
20 NEO 670
Source: CoinMarketCap, Aug-19 Source: Bloomberg
3Web 3.0: Internet of value, decentralized business models
Web 1.0/2.0 Internet of information is about sharing information eg emails, docs, pictures; transactions involving
value require a centralized party to validate buyer and seller, resulting in costs, delays and a central point of failure
Web 3.0 Internet of value: Blockchain is engineered to enable direct peer-to-peer transactions between parties
that don’t fully trust one another, and mathematically validate valuable and/or private transactions
Decentralized internet of Disruption:
value and trust, Which projects will
interacting without be winners in this
central authorities new, decentralized
Two-way world?
communication, cloud,
sharing and social Web 3.0
economy
One-way
communication
and email Web 2.0
Web 1.0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 4Digital assets will become a new asset class in the next 5 years
1. Capture long-term investment opportunities in the potentially most disruptive space globally
• Blockchain space expected to create trillions of dollars in value
• Still early in the innovation cycle
• Dominated by the US and Asia, with Europe lagging behind
2. Capture huge knowledge & information asymmetry
• Complex and vast space: >$200bn market size; >10,000 assets; inefficient retail-driven market
• 90% of tokens will be worthless; but select projects built by strong teams will be revolutionizing
• Only very limited number of investors with technical skills and informational advantage
3. Capture changing market structure with several catalysts
• Blockchain technology improving rapidly (scalability, governance, privacy); space attracting talent
• Institutional investors expected to accelerate once fiat on-ramps improved => fundamentals will
become more important
• Regulatory environment expected to become more accommodative
• Mass UX adoption expected within the next three years, eg Telegram, Libra, Bakkt, Terra, Brave
5A unique opportunity for family offices
1. L1 Digital originated out of Bellegarde Capital family office, because:
• Unique opportunity, disruption
• Information asymmetry can be exploited by sophisticated investor
• Several catalysts (technology, investors, regulations, adoption)
0.4
2. Fits perfectly into asset allocation, because: Low to negative correlations
0.2
• Expected high returns
• Low to negative correlations 0
• Recommended allocation of 1-5% -0.2
-0.4
3. Progressive investors entering the space:
• Tech family offices (Bloomberg, Thiel, Sequoia Partners)
• NextGens
• First institutional investors (Yale, Harvard, pension funds)
Forbes: “Crypto are becoming more popular
globally and are attracting growing interest,
but are not very well understood within the
Survey by Fidelity Investments: “22% of family office space.”
investors have some exposure to digital
assets, while 40 percent say they are open to
taking the plunge in the next five years.”
6The blockchain universe: Six sub-sectors
Private blockchains Services &
Layer 1 protocols Layer 2 technologies Decentralized Apps Asset tokenization
(enterprise, govmt) infrastructure
Payment Utility Utility Asset Tokens Private Venture Equity &
Coins Tokens Tokens & Stable Coins Tokens Hybrids
7
Source: Developed by L1 DigitalLayer 1 and Layer 2 protocols
Private blockchains
Layer 1 protocols Layer 2 technologies Decentralized Apps Asset tokenization Services
(enterprise, govmt)
• Store of value (BTC) • Scalability (lightning, • Payments (Flexa, • Art & collectibles • Private blockchains • Exchanges & OTC
• Privacy (Monero, Plasma, state Terra) (Codex) (Hyperledger, Ripple, (BitStamp, GDAX,
ZCash) channels, sidechains) • Remittances (Celo) • Real estate R3 Corda, Stellar) BitFinex, Kraken)
• Smart contract • Inter-operability • DeFi (MakerDao) • IP & music • Supply chain mgt • Brokerage/lending/
platforms (ETH, EOS, (Polkadot, Cosmos) • Dec. exchanges • Securities, loans & • Insurance short-selling
Dfinity, Tezos, NEO, • Privacy (zkp) (Binance, OmiseGo, other financial assets • Bank settlements (CryptoBroker,
Concordium) • Decentralized 0x, Enigma) • Stable coins (USDT, • Trade finance Genesis, Circle, Bakkt)
• DAG & IoT (IOTA, internet (NuCypher, • Gaming (CryptoKitties USDC, Dai, CHF) • Authentication • Storage & wallets
Spacemesh) OasisLabs, Aragon) Pryze, DecentraLand) • Digital central bank • KYC & compliance & (CryptoStorage, Xapo,
• Prediction markets currencies digital identity CoinBase, Kingdom
(Augur, NEAR) • Autonomous cars Trust, Ledger, BitGo)
• Storage & • Medical data • Mining & ASICs
computation power • Distributed (BitMain, BitFury)
(IPFS, Golem) electricity • Remittances (Abra,
• P2P lending (Bloom, • E-Government & BitPesa, coins.ph)
SALT) voting • Fiat on-ramps
• Digital identity (Civic) • Asset mgt
• Data/browser (Brave) • Staking
• Fundmgt (Melonport) • Chain analytics
• Video (Stream, LPeer) • Security tools
• Music (BitTorrent) • KYC & compliance
• Messaging (Telegram, • Advisory
Kin)
Payment Utility Utility Asset Tokens Private Venture Equity &
Coins Tokens Tokens & Stable Coins Tokens Hybrids
8
Source: Developed by L1 DigitalThe race to build the future Layer1 protocols
Fat protocol theory The blockchain trilogy
Unlike 1st generation of internet protocols like Achieving a blockchain trilogy represents the
TCP/IP, blockchain enables investments in main challenge
Web3.0 protocols & infrastructure
Decen-
tralized
Store-of-value blockchain
Blockchain
trilemma
Secure Scalable
Smart contract platform
Interoperable meta blockchain Once technology matures, many current
business models will:
• become more efficient
• be disrupted and/or replaced by new
decentralized business models
9Decentralized Apps (dApps)
Private blockchains
Layer 1 protocols Layer 2 technologies Decentralized Apps Asset tokenization Services
(enterprise, govmt)
• Store of value (BTC) • Scalability (lightning, • Payments (Flexa, • Art & collectibles • Private blockchains • Exchanges & OTC
• Payments Plasma, sharding, Terra) (Codex) (Hyperledger, Ripple, (BitStamp, GDAX,
• Privacy (Monero, state channels, • Remittances (Celo) • Real estate R3 Corda, Stellar) BitFinex, Kraken)
ZCash) sidechains) • DeFi (MakerDao) • IP & music • Supply chain mgt • Brokerage/lending/
• Smart contract • Inter-operability • Dec. exchanges • Securities, loans & • Insurance short-selling
platforms (ETH, EOS, (Polkadot, Cosmos) (Binance, OmiseGo, other financial assets • Bank settlements (CryptoBroker,
Dfinity, Tezos, NEO, • Privacy 0x, Enigma) • Stable coins (USDT, • Trade finance Genesis, Circle, Bakkt)
Concordium) • Decentralized • Gaming (CryptoKitties USDC, Dai, CHF) • Authentication • Storage & wallets
• DAG & IoT (IOTA, internet (NuCypher, Pryze, DecentraLand) • Digital central bank • KYC & compliance & (CryptoStorage, Xapo,
Spacemesh) OasisLabs, Aragon) • Prediction markets currencies digital identity CoinBase, Kingdom
(Augur, NEAR) • Autonomous cars Trust, Ledger, BitGo)
• Storage & • Medical data • Mining & ASICs
computation power • Distributed (BitMain, BitFury)
(IPFS, Golem) electricity • Remittances (Abra,
• P2P lending (Bloom, • E-Government & BitPesa, coins.ph)
SALT) voting • Fiat on-ramps
• Digital identity (Civic) • Asset mgt
• Data/browser (Brave) • Staking
• Fundmgt (Melonport) • Chain analytics
• Video (Stream, LPeer) • Security tools
• Music (BitTorrent) • KYC & compliance
• Messaging (Telegram, • Advisory
Kin)
Payment Utility Utility Asset Tokens Private Venture Equity &
Coins Tokens Tokens & Stable Coins Tokens Hybrids
10
Source: Developed by L1 DigitaldApps – Use cases
dApps = decentralized business models run by utility tokens
1. Flexa (payments US):
• 39,000 merchants in the US (Starbucks, McDonalds, Wholesale Foods), Gemini backed
• Fiat at the merchant, fast settlement, low transaction fees
• Powered by clients’ cryptos stored in SPEDN wallets or by Flexa coin (ERC20 based)
• Flexa coin earns the transaction fees, can be valued at NPV; 8x at go-live
2. Celo (financial inclusion and remittances):
• Phone number based money transfers and remittances
• Celo Dollar stablecoin (cUSD); other currencies via decentralized exchange; ETH fork
• Celo Gold coins earn PoS revenue, transfer fees
• DeFi layer on top (lending, insurance etc)
3. Helium (decentralized IoT wireless):
• Decentralized LP-WAN wireless networks powered by locals
• Hotspot operators earn Helium from the data senders; Proof-of-Coverage based
• Used for IoT, eg to track Lime scooters, dog tags, keys, agriculture sensors
4. Brave BAT (social media):
• Browser protecting data, 11m users
• Advertisement viewers are remunerated through BATs (keep 70% of add revenue)
5. Telegram (300m users)? Libra (2bn users)?
11Asset tokenization and stable coins
Private blockchains
Layer 1 protocols Layer 2 technologies Decentralized Apps Asset tokenization Services
(enterprise, govmt)
• Store of value (BTC) • Scalability (lightning, • Payments (Flexa, • Art & collectibles • Private blockchains • Exchanges & OTC
• Payments Plasma, sharding, Terra) (Codex) (Hyperledger, Ripple, (BitStamp, GDAX,
• Privacy (Monero, state channels, • Remittances (Celo) • Real estate R3 Corda, Stellar) BitFinex, Kraken)
ZCash) sidechains) • DeFi (MakerDao) • IP & music • Supply chain mgt • Brokerage/lending/
• Smart contract • Inter-operability • Dec. exchanges • Securities, loans & • Insurance short-selling
platforms (ETH, EOS, (Polkadot, Cosmos) (Binance, OmiseGo, other financial assets • Bank settlements (CryptoBroker,
Dfinity, Tezos, NEO, • Privacy 0x, Enigma) • Digital central bank • Trade finance Genesis, Circle, Bakkt)
Concordium) • Decentralized • Gaming (CryptoKitties currencies • Authentication • Storage & wallets
• DAG & IoT (IOTA, internet (NuCypher, Pryze, DecentraLand) • KYC & compliance & (CryptoStorage, Xapo,
Spacemesh) OasisLabs, Aragon) • Prediction markets • Stable coins digital identity CoinBase, Kingdom
(Augur, NEAR) (USDT, cUSD, USDC, • Autonomous cars Trust, Ledger, BitGo)
• Storage & Dai, Libra) • Medical data • Mining & ASICs
computation power • Distributed (BitMain, BitFury)
(IPFS, Golem) electricity • Remittances (Abra,
• P2P lending (Bloom, • E-Government & BitPesa, coins.ph)
SALT) voting • Fiat on-ramps
• Digital identity (Civic) • Asset mgt
• Data/browser (Brave) • Staking
• Fundmgt (Melonport) • Chain analytics
• Video (Stream, LPeer) • Security tools
• Music (BitTorrent) • KYC & compliance
• Messaging (Telegram, • Advisory
Kin)
Payment Utility Utility Asset Tokens Private Venture Equity &
Coins Tokens Tokens & Stable Coins Tokens Hybrids
12
Source: Developed by L1 DigitalPrivate blockchains; Services & infrastructure
Private blockchains Services &
Layer 1 protocols Layer 2 technologies Decentralized Apps Asset tokenization
(enterprise, govmt) infrastructure
• Store of value (BTC) • Scalability (lightning, • Payments (Flexa, • Art & collectibles • Private blockchains • Exchanges & OTC
• Payments Plasma, sharding, Terra) (Codex) (Hyperledger, Ripple, (BitStamp, GDAX,
• Privacy (Monero, state channels, • Remittances (Celo) • Real estate R3 Corda, Stellar) BitFinex, Kraken)
ZCash) sidechains) • DeFi (MakerDao) • IP & music • Supply chain mgt • Brokerage/lending/
• Smart contract • Inter-operability • Dec. exchanges • Securities, loans & • Insurance short-selling
platforms (ETH, EOS, (Polkadot, Cosmos) (Binance, OmiseGo, other financial assets • Bank settlements (CryptoBroker,
Dfinity, Tezos, NEO, • Privacy 0x, Enigma) • Stable coins (USDT, • Trade finance Genesis, Circle, Bakkt)
Concordium) • Decentralized • Gaming (CryptoKitties USDC, Dai, CHF) • Authentication • Storage & wallets
• DAG & IoT (IOTA, internet (NuCypher, Pryze, DecentraLand) • Digital central bank • KYC & compliance & (CryptoStorage, Xapo,
Spacemesh) OasisLabs, Aragon) • Prediction markets currencies digital identity CoinBase, Kingdom
(Augur, NEAR) • Autonomous cars Trust, Ledger, BitGo)
• Storage & • Medical data • Mining & ASICs
computation power • Distributed (BitMain, BitFury)
(IPFS, Golem) electricity • Remittances (Abra,
• P2P lending (Bloom, • E-Government & BitPesa, coins.ph)
SALT) voting • Fiat on-ramps
• Digital identity (Civic) • Asset mgt
• Data/browser (Brave) • Staking
• Fundmgt (Melonport) • Chain analytics
• Video (Stream, LPeer) • Security tools
• Music (BitTorrent) • KYC & compliance
• Messaging (Telegram, • Advisory
Kin)
Payment Utility Utility Asset Tokens Private Venture Equity &
Coins Tokens Tokens & Stable Coins Tokens Hybrids
13
Source: Developed by L1 DigitalThe blockchain universe: BTC only one application among many
Private blockchains Services &
Layer 1 protocols Layer 2 technologies Decentralized Apps Asset tokenization
(enterprise, govmt) infrastructure
• Store of value (BTC) • Scalability (lightning, • Payments (Flexa, • Art & collectibles • Private blockchains • Exchanges & OTC
• Privacy (Monero, Plasma, sharding, Terra) (Codex) (Hyperledger, Ripple, (BitStamp, GDAX,
ZCash) state channels, • Remittances (Celo) • Real estate R3 Corda, Stellar) BitFinex, Kraken)
• Smart contract sidechains) • DeFi (MakerDao) • IP & music • Supply chain mgt • Brokerage/lending/
platforms (ETH, EOS, • Inter-operability • Dec. exchanges • Securities, loans & • Insurance short-selling
Dfinity, Tezos, NEO, (Polkadot, Cosmos) (Binance, OmiseGo, other financial assets • Bank settlements (CryptoBroker,
Concordium) • Privacy 0x, Enigma) • Digital central bank • Trade finance Genesis, Circle, Bakkt)
• DAG & IoT (IOTA, • Decentralized • Gaming (CryptoKitties currencies • Authentication • Storage & wallets
Spacemesh) internet (NuCypher, Pryze, DecentraLand) • KYC & compliance & (CryptoStorage, Xapo,
OasisLabs, Aragon) • Prediction markets • Stable coins digital identity CoinBase, Kingdom
(Augur, NEAR) (USDT, cUSD, USDC, • Autonomous cars Trust, Ledger, BitGo)
• Storage & Dai, Libra) • Medical data • Mining & ASICs
computation power • Distributed (BitMain, BitFury)
(IPFS, Golem) electricity • Remittances (Abra,
• P2P lending (Bloom, • E-Government & BitPesa, coins.ph)
SALT) voting • Fiat on-ramps
• Digital identity (Civic) • Asset mgt
• Data/browser (Brave) • Staking
• Fundmgt (Melonport) • Chain analytics
• Video (Stream, LPeer) • Security tools
• Music (BitTorrent) • KYC & compliance
• Messaging (Telegram, • Advisory
Kin)
Payment Utility Utility Asset Tokens Private Venture Equity &
Coins Tokens Tokens & Stable Coins Tokens Hybrids
14
Source: Developed by L1 DigitalStrategy framework – Fundamental vs Trading managers
15Trading strategies: Long/short, arbitrage, CTAs, market making
Arbitrage funds capture price inefficiencies:
Arbitrage performs across market environments
• Intra-exchange, inter-exchange, futures vs spot, basis
220 trades, forks
200 • Sophisticated technology stack, systematic investment
180 process, deep API connectivity
160 • Special arrangements with exchanges: higher order-per-
140 second limits, lower transaction fees
120 • Benefit from volatility and hyped market environments
100
80
60
11/2017 01/2018 03/2018 05/2018 07/2018
Crypto Arb Basket Hold10 Index
Trend-followers able to decouple from the market Short term systematic funds capture trends:
• Focused on short term momentum and trend following
130 strategies
120 • Long or short exposure executed via futures or spot
110 markets
100 • Short-selling via futures: CME, BitMEX, OKEx, LedgerX
90 • Short-selling via cash shorts: brokers (Genesis, DRW,
80 Jump) or exchanges (eg Binance, Huobi) @ 0.5%-1.5%
70 pm
60
01/2018 02/2018 03/2018 04/2018 05/2018 06/2018 07/2018 08/2018
Crypto ST CTA Fund Bitcoin
16Fundamental strategies: Value, liquid venture, SAFTs
Typical portfolio Fundamental manager’s typical profile:
• Managers typically based in Silicon Valley; interdisciplinary teams
60-85% • Fundamental investment process:
Liquid digital assets • VC like sourcing and due diligence: team, tech, market size, go-
to market strategy, competition
• Store of value • Crypto specific: network, platform, open source risk
• Protocol layers • Token economics: protocol usage and velocity
• Utility hypothesis • Valuation
• Privacy
• Long-biased, but some portfolios with dynamic net exposure,
assuming idiosyncratic risks and hedging systematic ones
• SAFTs, pre-token investing: high quality, disruptive projects
15-40%
• Manager brand and technical expertise key in gaining access to high
SAFTs
quality projects
• New technologies (scalability,
privacy, infrastructure)
• New themes (dApps etc)
* SAFT = Simple Agreement for Future Tokens 17Investment challenges
1. Access to best projects and/or best managers
2. Complexity
3. Operational risks: storage, counterparty risks, mark-to-market
4. Direct investments: cumbersome process, storage, volatility
5. Fund investments: sourcing, high min investments, legal structures, liquidity
18Benefits of investing via multi-manager solutions
1. Diversification
• Strategy diversification: liquid venture, long/short, event-driven, arbitrage, CTA, market making
• Geographical diversification: US, Asia, Europe
• Manager diversification: mitigating operational risks
2. Sourcing & access
• 800 funds: sourcing and selecting the best managers globally
• Access to closed/difficult-to-access brand name funds with high minimum investments
• Access to high quality, capacity constrained projects
• Preferred terms negotiated with the managers (lower fees, better liquidity)
3. Easy to invest
• Institutional quality multi-manager fund structure, due diligence and monitoring
• Low minimum investments
• Knowledge transfer
19Conclusion
Cambridge Associates:
"The crypto space has taken the investment world by surprise. Though liquid crypto prices
have fallen sharply of late, investment activity in the space is booming. Investors interested in
the industry need to spend a considerable amount of time learning about the space, getting
comfortable with its very high risks, performing manager due diligence, and carefully
implementing allocations. Despite the challenges, we believe that it is worthwhile for
investors to begin exploring this area today with an eye toward the long term."
By Marcos Veremis – February 2019
20Contact
L1 Digital AG
Limmatquai 1
8001 Zurich
Switzerland
info@L1.digital
Linkedin.com/company/l1digital
Legal Disclaimer:
This presentation is for informational purposes only. An investor should consult and review the appropriate offering memorandum before making any investment decisions. This
presentation does not constitute an offer to any person to whom it would be unlawful to make such an offer. Prospective investors should inform themselves and take
appropriate advice as to any applicable legal requirements and any applicable taxation and exchange control regulations in the countries of their citizenship, residence or
domicile which might be relevant to the subscription, purchase, holding, exchange, redemption or disposal of any investments. Past performance is not a guide to future
performance and the value of investments and the income derived from them can go down as well as up. Future returns are not guaranteed and a loss of principal may occur.
Opinions expressed are current opinions as of the date appearing in this material only. No part of this material may be Copied, photocopied or duplicated in any form, by any
means; or redistributed without L1 Digital AG‘s prior written consent. This information is intended solely for the use of the person to whom it is given and may not be reproduced
or given to any other person (in Switzerland only suitable for qualified investors as defined in para. 10 of the Ordinance on Collective Investment Schemes). Please note that calls
to L1 Digital AG may be monitored or recorded.
This document does not constitute an issue prospectus. The contents of this document are for general information purposes only and should not be considered as
recommendation or investment advice. The document has been prepared for the use of the recipient as qualified investor. It does not constitute an offer or an invitation by or on
behalf of L1 Digital to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in
this publication have been compiled or arrived at from sources believed to be reliable but L1 Digital does not make any representation as to their accuracy or completeness and
does not accept liability for any direct or indirect damages arising from the use hereof. The terms of the note product described in this document are indicative only. The right to
remedy any shortcomings which may be present in this document remains reserved. The final terms of the note product will be set forth in the relevant offering document. An
investment in L1 Digital Multi Manager Note shall entail substantial risks, including potentially the risk of loss of one’s entire investment and is appropriate only for qualified
investors understanding the risks involved. Before entering into any transaction, you should consider the suitability of the note product with regard to your particular
circumstances and independently review (with your professional advisers as necessary) the specific financial risks as well as legal, regulatory, credit, tax and accounting
consequences. No investment should be made before having read very carefully the final note prospectus. This document is a personal copy addressed to you as qualified
investor as defined above. This document may not be reproduced either in whole, or in part, and may not be passed to third parties without the written permission of L1 Digital.
By accepting this handout or any of its pages you understand, accept and agree to the terms as set out above. This document was produced by and the opinions expressed are
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21Webinar 16.09.2019 Warum Blockchain & Crypto Assets ein Bestandteil der auf die Zukunft ausgerichteten Asset Allokation eines Family Offices sein sollten
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