Warum Blockchain & Crypto Assets ein Bestandteil der auf ... · 2 Ethereum 20’090 3 XRP 11’478...

Warum Blockchain & Crypto Assets ein Bestandteil der auf die Zukunftausgerichteten Asset Allokation eines Family Offices sein sollten

Webinar 16.09.2019

L1D introduction

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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

Everyone talks about Bitcoin but there are 1000s of other projects

BTC USD price

Source: Bloomberg

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Top 20 cryptos by market cap ($m)

Source: CoinMarketCap, Aug-19

1 Bitcoin 181’949

2 Ethereum 20’090

3 XRP 11’478

4 Bitcoin Cash 5’539

5 Litecoin 4’566

6 USD Tether 4’060

7 Binance Coin 3’953

8 EOS 3’282

9 Bitcoin SV 2’376

10 Stellar 1’371

11 Monero 1’366

12 Cardano 1’275

13 Unus Sed Leo 1’177

14 TRON 1’161

15 Dash 809

16 Ethereum Classic 781

17 Tezos 737

18 IOTA 722

19 Chainlink 719

20 NEO 670

0.01

0.10

1.00

10.00

100.00

1,000.00

10,000.00

100,000.00

Web 3.0: Internet of value, decentralized business models

41980 1985 1990 1995 2000 2005 2010 2015 20252020

Web 1.0

Web 2.0

Web 3.0

Disruption: Which projects will be winners in this new, decentralized world?

One-way communication and email

Two-way communication, cloud, sharing and social economy

Decentralized internet of value and trust, interacting without central authorities

Web 1.0/2.0 Internet of information is about sharing information eg emails, docs, pictures; transactions involvingvalue 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 partiesthat don’t fully trust one another, and mathematically validate valuable and/or private transactions

Digital assets will become a new asset class in the next 5 years

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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

A unique opportunity for family offices

Forbes: “Crypto are becoming more popularglobally and are attracting growing interest,but are not very well understood within thefamily office space.”

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)

2. Fits perfectly into asset allocation, because:

• Expected high returns

• Low to negative correlations

• Recommended allocation of 1-5%

3. Progressive investors entering the space:

• Tech family offices (Bloomberg, Thiel, Sequoia Partners)

• NextGens

• First institutional investors (Yale, Harvard, pension funds)

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Survey by Fidelity Investments: “22% ofinvestors have some exposure to digitalassets, while 40 percent say they are open totaking the plunge in the next five years.”

Low to negative correlations

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The blockchain universe: Six sub-sectors

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Layer 1 protocols Layer 2 technologies Decentralized Apps Asset tokenizationPrivate blockchains(enterprise, govmt)

Services & infrastructure

PaymentCoins

Utility Tokens

Utility Tokens

Asset Tokens & Stable Coins

Private Tokens

Venture Equity & Hybrids

Source: Developed by L1 Digital

Layer 1 and Layer 2 protocols

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Services

• Store of value (BTC)• Privacy (Monero,

ZCash)• Smart contract

platforms (ETH, EOS, Dfinity, Tezos, NEO, Concordium)

• DAG & IoT (IOTA, Spacemesh)

• Scalability (lightning, Plasma, statechannels, sidechains)

• Inter-operability(Polkadot, Cosmos)

• Privacy (zkp)• Decentralized

internet (NuCypher, OasisLabs, Aragon)

• Payments (Flexa, Terra)

• Remittances (Celo)• DeFi (MakerDao)• Dec. exchanges

(Binance, OmiseGo, 0x, Enigma)

• Gaming (CryptoKittiesPryze, DecentraLand)

• Prediction markets(Augur, NEAR)

• Storage & computation power (IPFS, Golem)

• P2P lending (Bloom, SALT)

• Digital identity (Civic)• Data/browser (Brave)• Fundmgt (Melonport)• Video (Stream, LPeer)• Music (BitTorrent)• Messaging (Telegram,

Kin)

• Art & collectibles(Codex)

• Real estate• IP & music• Securities, loans &

other financial assets• Stable coins (USDT,

USDC, Dai, CHF)• Digital central bank

currencies

• Private blockchains(Hyperledger, Ripple, R3 Corda, Stellar)

• Supply chain mgt• Insurance• Bank settlements• Trade finance• Authentication• KYC & compliance &

digital identity• Autonomous cars• Medical data• Distributed

electricity• E-Government &

voting

• Exchanges & OTC(BitStamp, GDAX, BitFinex, Kraken)

• Brokerage/lending/ short-selling(CryptoBroker, Genesis, Circle, Bakkt)

• Storage & wallets(CryptoStorage, Xapo, CoinBase, Kingdom Trust, Ledger, BitGo)

• Mining & ASICs (BitMain, BitFury)

• Remittances (Abra, BitPesa, coins.ph)

• Fiat on-ramps• Asset mgt• Staking• Chain analytics• Security tools• KYC & compliance• Advisory

PaymentCoins

Utility Tokens

Utility Tokens


Private Tokens



The race to build the future Layer1 protocols

Achieving a blockchain trilogy represents themain challenge

Decen-tralized

Secure Scalable

Blockchain trilemma

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Fat protocol theory The blockchain trilogy

Once technology matures, many currentbusiness models will:• become more efficient• be disrupted and/or replaced by new

decentralized business models

Unlike 1st generation of internet protocols likeTCP/IP, blockchain enables investments inWeb3.0 protocols & infrastructure

Store-of-value blockchain

Smart contract platform

Interoperable meta blockchain

Decentralized Apps (dApps)

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Services

• Store of value (BTC)• Payments• Privacy (Monero,




• Scalability (lightning, Plasma, sharding, state channels, sidechains)


• Privacy• Decentralized










Kin)





currencies





voting







PaymentCoins

Utility Tokens

Utility Tokens


Private 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)?

dApps – Use cases

dApps = decentralized business models run by utility tokens

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Asset tokenization and stable coins

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Services

















Kin)



other financial assets• Digital central bank

currencies

• Stable coins(USDT, cUSD, USDC, Dai, Libra)





voting







PaymentCoins

Utility Tokens

Utility Tokens


Private Tokens



Private blockchains; Services & infrastructure

13



















Kin)





currencies





voting







PaymentCoins

Utility Tokens

Utility Tokens


Private Tokens



The blockchain universe: BTC only one application among many

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• Store of value (BTC)• Privacy (Monero,
















Kin)



other financial assets• Digital central bank

currencies

• Stable coins(USDT, cUSD, USDC, Dai, Libra)





voting







PaymentCoins

Utility Tokens

Utility Tokens


Private Tokens



Strategy framework – Fundamental vs Trading managers

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11/2017 01/2018 03/2018 05/2018 07/2018Crypto Arb Basket Hold10 Index

Trading strategies: Long/short, arbitrage, CTAs, market making

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Arbitrage funds capture price inefficiencies:• Intra-exchange, inter-exchange, futures vs spot, basis

trades, forks• Sophisticated technology stack, systematic investment

process, deep API connectivity• Special arrangements with exchanges: higher order-per-

second limits, lower transaction fees• Benefit from volatility and hyped market environments

Arbitrage performs across market environments

Trend-followers able to decouple from the market

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70

80

90

100

110

120

130

01/2018 02/2018 03/2018 04/2018 05/2018 06/2018 07/2018 08/2018

Crypto ST CTA Fund Bitcoin

Short term systematic funds capture trends:• Focused on short term momentum and trend following

strategies• Long or short exposure executed via futures or spot

markets• Short-selling via futures: CME, BitMEX, OKEx, LedgerX• Short-selling via cash shorts: brokers (Genesis, DRW,

Jump) or exchanges (eg Binance, Huobi) @ 0.5%-1.5%pm

Fundamental strategies: Value, liquid venture, SAFTs

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Fundamental manager’s typical profile:

• Managers typically based in Silicon Valley; interdisciplinary teams

• Fundamental investment process:• VC like sourcing and due diligence: team, tech, market size, go-

to market strategy, competition• Crypto specific: network, platform, open source risk• Token economics: protocol usage and velocity • Valuation

• Long-biased, but some portfolios with dynamic net exposure,assuming idiosyncratic risks and hedging systematic ones

• SAFTs, pre-token investing: high quality, disruptive projects

• Manager brand and technical expertise key in gaining access to highquality projects

Typical portfolio

60-85%Liquid digital assets

• Store of value• Protocol layers• Utility hypothesis• Privacy

15-40%SAFTs

• New technologies (scalability, privacy, infrastructure)

• New themes (dApps etc)

* SAFT = Simple Agreement for Future Tokens

Investment challenges

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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

Benefits of investing via multi-manager solutions

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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

Conclusion

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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

Contact

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Legal Disclaimer:

This presentation is for informational purposes only. An investor should consult and review the appropriate offering memorandum before making any investment decisions. Thispresentation 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 takeappropriate advice as to any applicable legal requirements and any applicable taxation and exchange control regulations in the countries of their citizenship, residence ordomicile which might be relevant to the subscription, purchase, holding, exchange, redemption or disposal of any investments. Past performance is not a guide to futureperformance 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 anymeans; 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 reproducedor 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 callsto 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 asrecommendation 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 onbehalf 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 inthis 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 anddoes 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 toremedy 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. Aninvestment 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 qualifiedinvestors understanding the risks involved. Before entering into any transaction, you should consider the suitability of the note product with regard to your particularcircumstances and independently review (with your professional advisers as necessary) the specific financial risks as well as legal, regulatory, credit, tax and accountingconsequences. No investment should be made before having read very carefully the final note prospectus. This document is a personal copy addressed to you as qualifiedinvestor 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 arethose of L1 Digital as of the date of writing and are subject to change.

L1 Digital AGLimmatquai 18001 [email protected]/company/l1digital

Warum Blockchain & Crypto Assets ein Bestandteil der auf die Zukunftausgerichteten Asset Allokation eines Family Offices sein sollten

Webinar 16.09.2019

Warum Blockchain & Crypto Assets ein Bestandteil der auf ... · 2 Ethereum 20’090 3 XRP 11’478...

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