Digital Asset Update | September 2022

Digital Asset Update  | Setpember 2022

See below for our Digital Asset Update | September 2022 Summary points below the video.

Digital Asset Update | Setpember 2022 Video Overview:

 

0:50 The Merge | ETH

2:36 Crypto Crash | Bloomberg

3:39 Total Cryptocurrency Market Cap

4:48 In the News

7:21 Crypto Fees

8:51 Total Value Locked

9:34 Stablecoins

11:20 Stablecoin Volume

 

If you are interested in the Willow Crypto SMA, please click here or give us a call.

Best regards,

The Willow Team
+1 413 236 2980

Digital Asset Update + Open Q&A | July 2022

Digital Asset Update + Q&A | July 2022

See below for our Digital Asset Update + Q&A | July 2022 Summary points below the video.

Digital Asset Update + Q&A | July 2022 Video Overview:

1:17 Recent Events in Crytpo

1:29 CeFi Lending Failures

5:29 What Happened

11:26 What’s still viable coming out of this

14:15 Custodian’s survival

16:38 New Developments

19:50 Ethereum Updates

23:37 Q: How do these changes affect giving to non-profits

 

If you are interested in the Willow Crypto SMA, please click here or give us a call.

Best regards,

The Willow Team
+1 413 236 2980

Market Update + Q&A, January 2022

Market Update + Q&A, January 2022

See below for our January Market Update + Q&A. Summary points below the video.

Market Update & Q&A Video Summary (January 2022):

00:09 Disclaimer

01:41 Risk Indicators – Volatility 02:31 Risk Indicators – CDS Spreads

03:15 Risk Indicators – Bond Spreads

04:09 Velocity of Money

05:38 Trade Deficit

07:44 Margin Debt

11:28 Inflation – Transitory or Not?

25:27 Crypto Update – Protocol Revenue

27:37 Crypto Revenue in Perspective

28:49 Creator Economy

34:17 DeFi Q+A

36:03 Q: How would you use crypto as a currency – stable coins?

37:15 Q: Inflation, Labor, Supply Problems – building Cash in Positions

37:41 Q: Do you feel that emerging markets are underinvested?

39:10 Q: Where do you see the greatest risk in opportunities in the year ahead?

40:30 Q: In an unpredictable world do you bet on using cash positions to invest in growth stocks?

43:19 Q: Questions on various Stocks

To set up a meeting, please click here or give us a call.

Best regards,

The Willow Team
+1 413 236 2980

Digital Asset Update + Open Q&A | October 2021

Digital Asset Update + Open Q&A | October 2021

See below for our Digital Asset Update + Open Q&A | October 2021 Summary points below the video.

Digital Asset Update + Open Q&A | October 2021 Video Summary:

  • The idea around stablecoins and digitizing dollars is still in its early stages, but it is only gaining more and more adoption. We’ve been seeing a lot of positive development in this area recently. The US FDIC is starting to study deposit insurance for stablecoins. A Federal Reserve paper recently came out that discussed how the rise of cryptocurrencies could challenge the dominance of the US dollar. More and more countries are starting to consider Bitcoin as a legal currency, and more institutions are starting to favor and custody cryptocurrencies.
  • DeFi, de-centralized finance, offers new avenues for borrowing and lending that are extremely similar in concept to the alternative ways of financing (other than banks) that many family offices and big money utilize. DeFi has the potential to open it up to the whole, as opposed to the few who are the 0.1% that really control a lot of the wealth around the globe. Visa has just deployed one of its first smart contracts on the Ethereum test network and they have a plan of creating the backend infrastructure to facilitate a global processing of central bank backed digital currencies.
  • A recent study from Fidelity digital assets shows that 70% of investors have a neutral/positive perception of digital assets. This is a positive sign given that when something is perceived as acceptable by a large group of people, typically that spreads (think gold). There has also been a big push recently for institutions to try and add these things to their balance sheets and as more companies pushing for this it only further lends to the credibility to the space.
  • The total cryptocurrency market cap is over the $2 trillion mark for the entirety of the digital asset space, which is nearing its previous all-time high back in May. As technicians, we want to see it break above that level, but again it shows that there is momentum here and the overall trend is generally intact. Total value locked on all of the different chains also recently hit an all-time high, which is another huge indicator for adoption.
  • While regulation can seem frightening in this space, it’s a good thing, as long as it’s thoughtfully done. You have these legacy players in the space trying to use old rules on new technology, and they need to come up to speed on a lot of what this is all about. What more and more regulators are going to find as they dig into this space is it really is self-regulating in many ways due to the transparent nature of how public blockchains work. We do firmly believe that once regulators really dive into this and start understanding these things, they’ll see that it is a much more transparent systems than a lot of the current ones they use.

Questions from Q&A

  1. “What are your thoughts on Solana?”
  2. “What is your ‘green energy’ source?”
  3. “As Ethereum moves and next year when they have their upgrade, how is that going to affect mining?”
  4. “Are capital gains tax figured into the buying and selling of crypto, is it similar to a currency?”

Articles referenced

Other links

If you are interested in the Willow Crypto SMA, please click here or give us a call.

Best regards,

The Willow Team
+1 413 236 2980

Digital Asset Update + Open Q&A | August 2021

Digital Asset Update + Open Q&A | August 2021

See below for our Digital Asset Update + Open Q&A | August 2021 Summary points below the video.

Digital Asset Update + Open Q&A | August 2021 Video Summary:

  • We’re starting to see more and more institutional and global adoption of digital assets. In general, more companies are leaning into this whole space and starting to explore at a much greater level than even a few years ago. For example, the second largest US mortgage lender is now going to accept payments in Bitcoin. Globally, Hong Kong and Singapore and many other areas are starting to explore different ways to tokenize bonds and a variety of other assets on these kinds of platforms that tie back to government use cases.
  • Over 55% of the top 100 banks in the world all have some exposure to digital assets. What we see happening is that these financial institutions are working towards figuring out the DeFi, or decentralized finance, space. Currently, the total value locked (TVL) in DeFi, how much actual money is locked in contracts on things like the Ethereum network, is around $86 billion. Last September, it was around 5 billion, which is demonstrating strong and continued growth in this space. Stablecoins, which are a digital representation of something like the US dollar, are also something we keep an eye on in the DeFi space. In May, almost $800 billion in Stablecoins were transferred, which also shows impressive and continued growth. What we see happening is that there may be a shift from traditional financial rails to crypto rails (or a hybrid in the interim) which would provide much more transparency than today’s very opaque system, along with speed and security.
  • Two innovations that have been built off of blockchain technology are NFTs and DAOs. NFTs, non fungible tokens, are a digital representation of something unique. Something is fungible if it can easily be replaced or has no characteristics that make it unique (e.g. one dollar is one dollar regardless of where of who has it). NFTs are presenting some fascinating use cases in the art world, where you could tokenize a piece of art and sell it off in fractions. It can be used in combating counterfeiting. It can also be used for things like tickets to sporting events and licenses and certificates. While we are potentially in a bubble of people buying and selling gifs and memes at extreme prices, there has been a lot of growth in this space over the past few months and we believe NFTs will have real-world use case that have just started. Think back to the days of trading cards, where rare baseball cards would fetch a high premium, we feel the comparison here is appropriate especially as a digitally native generation ages these kinds of ideas don’t seem so farfetched. NFTs in gaming, where players own the actual assets they find or win in games is also exploding in use. Gaming is one of the things that really solidified the early internet and helped result in its explosion of use, same could be happening here.
  • A DAO is a decentralized autonomous organization. Another way to think of it is just a digital organization or an organization that is essentially run by code that are being built on top of a blockchain. We are still in the early stages here but DAOs offer a new and unique way for people to organize around a cause and feel this space is worth paying attention to as it develops.
  • In regards to regulation of the digital asset space, we believe that there will be all types of confusion by regulators and many lawsuits similar to the early days of the internet where things like encryption were illegal. We fully expect to see the same thing happen here over the next few years until regulations gets sorted into something that makes sense that allows for innovation to thrive. Messing this up could have massive implications on the US’s ability to lead in this space so it is important our regulators are properly informed and get this right.
  • Right now, our Willow Crypto strategy has broad exposure to digital assets like Ethereum and Bitcoin, exposure to the DeFi space, and exposure to the data infrastructure economy with things like Chainlink that provide core infrastructure services that make this whole space more useful. We are looking to expand our strategy to include more components of the ecosystem, broaden L1 exposure, and explore the exciting growth of the metaverse. Ultimately, we see us continuing down that road and expanding each of these sub-strategies under our flagship Willow Crypto strategy.

Questions from Q&A

  1. “In these crazy times how do we invest? How do we navigate and still be safe, what percent in the market, what percent in currencies, and what percent in cash?”
  2. “Will the dollar be losing value continually and what will affect that?”
  3. “Is the SEC guy with Fireblocks basically a highly paid lobbyist? Does his joining that firm necessarily show his integrity or is it motivated by profit?”
  4. “It sounds like many of the recent, large global hacks have been facilitated by crypto, including one that has resulted in a refund. Please address the significance of this.”
  5. “How do you invest in DeFi Metaverse, etc? I’m glad you can, however, it’s a mystery as to how.”
  6. “Is the fall of Afghanistan a potentially destabilizing market even for the future of crypto, or is it one that will likely gather more market strength?”
  7. “Should investors be concerned about all the noise coming out of Washington and about regulation on the sector?”
  8. “We’ve used gold underlying the dollar and it is no longer true. What underlies the value of crypto? Is it just artificial and created?”
  9. “Why did you select Gemini versus other custodian providers?”
  10. “Is your goal to not be scared by the wolves and sustained client fears that cryptocurrency’s volatility is aligned with you indicated investment timeline?”
  11. “Is it possible to cross-reference to firms like Fidelity in terms of that they offer?”

If you are interested in the Willow Crypto SMA, please click here or give us a call.

Best regards,

The Willow Team
+1 413 236 2980

Digital Asset Update + Open Q&A

Digital Asset Update + Open Q&A

See below for our Digital Asset Update + Open Q&A Summary points below the video.

Digital Asset Update + Open Q&A Video Summary:

  • We are not surprised by the recent draw down in Bitcoin and Ethereum. We fully expect these trends of volatility to continue until this becomes a widely adopted asset class. This is why we want to ensure that everyone is aware of and comfortable with the risks associated with digital assets.
  • El Salvador recently adopted Bitcoin as a legal tender alongside the US dollar. We question what other countries may follow suit and what impact that might have on the dollar long-term.
  • We’ve been trying to answer the question of ‘how do you start to value digital assets’, especially with all the speculation out there. What are some tangible ways in which we can start to understand real value and utility? One of the ways is to look at the fees generated through the usage of different networks. Another is understanding how the tokenomics, of the economics of the digital asset, supply and demand, of the asset works. You can also compare the growth of different digital assets similarly to quarterly earnings calls in traditional finance – for user acquisition to fees generated, usage rates, number of holders, and so on and how these have changed year over year.
  • Total value locked (TVL) is another interesting fundamental to follow. It shows how much of people’s digital assets they are locking in smart contracts – essentially making it inaccessible for a period of time in hopes of tapping leverage or earning an interest rate (think preliminary fixed income type products). Currently, this is cost-prohibitive for an individual to do a small transaction because the fees are too high to make it viable at scale. Bitcoin’s lightning network is a technology solution to bring those fees down so people can transact with smaller payments back and forth and to merchants. Bitcoin has about 45 million dollars locked into Lightning, while the TVL in DeFi built on Ethereum, is currently securing for closer to 47 billion dollars. Advances in Ethereum layer 2’s are also speeding up DeFi usage and lowering transaction costs considerably.
  • The Beacon Chain on Ethereum already launched and is one of the stepping stones from ETH1.0 to ETH2.0. This change will make the network arguable more secure, reduce and massively increase scalability, so that instead of 14 or so transactions per second now, theoretically, you could get up to hundreds of thousands of transactions per second. This change of the consensus mechanism also reduces the amount of energy the Ethereum platform consumers by over 99%. Over 5 million Ether, which is worth billions of dollars, have already been locked into this contact that is inaccessible until what is called “the merge” happens, where the Ethereum network moves from the proof of work consensus to proof of stake consensus. This shows that there is a lot of trust being placed that this system will work.
  • When you start to see big accounting firms continue to study and consult in a space, when you start to see those companies getting involved, there is more viability to what you’re seeing. We’re starting to see institutions adopt and develop blockchain technology at a much more rapid pace, as well as more blockchain related job postings popping up around the world.

Questions from Q&A

  1. “Is it better to have a fixed supply in your coin for your tokenomics?”
  2. “Do you continue to support Bitcoin given the apparent position of the Chinese Government?”
  3. “How can crypto environmental costs be curtailed to make it viable as a sustainable investment?”
  4. “What do you feel the new JPM coinlink and offer will do for the industry?”
  5. “Do you accept retirement accounts in this space?”

If you are interested in the Willow Crypto SMA, please click here or give us a call.

Best regards,

The Willow Team
+1 413 236 2980

Willow Crypto: An Introduction & Open Q&A Part II

Willow Crypto: An Introduction & Open Q&A Part II

See below for our Willow Crypto: An Introduction + Open Q&A Part II Summary points below the video.

Willow Crypto: An Introduction + Open Q&A Part II Video Summary:

  • The reason why we started looking at this area for investment is because of the similarities it shares with the early internet build out in the mid-1990s and the potential that was unlocked by early innovation. This, to us, is the next iteration of the internet, or web 3.0 as it’s being termed. While termed “cryptocurrencies” too much emphasis is being placed on the “currency” part resulting in many overlooking or misunderstanding the implication of the underlying technology that is being developed here.
  • Web 3.0 is where everything is going to move over the coming decade. Each wave of the Web makes things cheaper, faster and more secure— starting with Netscape and AOL, and then transitioning into social networks, gig economy sites, and now digital currencies and the infrastructure of distributed ledgers. Naturally, this is the direction that business is going to go, opening up a whole new level of productivity, efficiency, and innovation.
  • DeFi, or decentralized finance, is showing the power of ONE use-case that cryptocurrencies unlock. An entirely new permissionless system is being built that challenges the legacy systems of today and redefines trust. It’s allowing end users to lend, loan, collect interest, speculate, save, and insure things in ways that allow for more participation without the need for intermediation (a massive potential cost saving opportunity). This idea is really taking off because it is faster, more secure, and more efficient than legacy systems and all you need is a phone and an internet connection to participate.
  • Another major use case that continues to show strong signs of adoption is the “stablecoin.” A stable coin is typically pegged to a real work currency or unit of value whose main goal is to track the value of the peg at a 1:1 ratio. The idea is instead of having physical dollars in your wallet, you could have a digital representation of that dollar on a blockchain where you and can interact with it.
  • One more innovation of blockchain and distributed ledgers is that they allow for tokenization, where you’re creating a digital representation of any real-world asset. The possibilities here really are endless.
  • A question we get asked frequently is about the environmental impact of cryptocurrencies as a whole. There was a big study done looking at Bitcoin, which is our largest proof of work consensus mechanism using the blockchain (most energy intensive). They found that 77.6% of Bitcoin’s electrical usage is coming from renewable sources, making Bitcoin mining “more renewables driven than almost every other large-scale industry in the world.” If you look at where people are building crypto mines, they are usually by hydroelectric dams. Instead of that energy being wasted on off hours, it goes and gets diverted to power many of these mines. Also, from a use case standpoint, blockchain can make tracking and trading carbon credits way more efficient than any system we have today.
  • One of our driving reasons for investing in digital assets is the return potential. Obviously this is not guaranteed but when we look at adoption and market penetration curves they signal to us that there is still plenty of room to grow.
  • One of the reasons why this asset class a whole might make sense for some people is to hedge against other uncertainties, such as devaluation of the dollar, negative interest rates, and USD reserve status. 
  • Tokenomics looks at the internal economics of a specific blockchain and the currencies and assets that operate on top of it. It examines token supply, demand, issuance, inflationary and deflationary pressures to help value how much a token or network should be worth. 
  • There is a generation shift that is happening from the Baby Boomer generation to Millennials, and with that there will be a massive transfer of wealth. The Millennials will be more likely to adopt cryptocurrency and put some of that transferred wealth into digital assets, being digital natives (growing up in the digital world exclusively). 
  • An interesting metric to follow is the about of Bitcoin held in exchange wallets. This shows the amount of Bitcoin that could easily be traded. What is worth noting is that the supply of Bitcoin on exchanges has been steadily declining. What this means is users are pulling their bitcoin off exchanges and moving it to their own private wallet – lowering the float available to trade. This can have interested price implications if demand continues to grow. 
  • Total locked value is another interesting fundamental to follow. It show how much of people’s crypto they are locking in smart contracts – essentially making it inaccessible for a period of time in hopes of tapping leverage or earning an interest rate (think preliminary fixed income type products). 
  • Ethereum is moving from Eth1.0 to Eth2.0, changing its consensus mechanism from proof of work to proof of stake, which is much more environmentally friendly, faster, and more secure. 
  • A Triple Point Asset is one that acts as a capital asset (ongoing source of value, generates value, e.g. equities/real estate), a consumable/transformable asset (can be consumed or transformed into something else that produces economic yield, e.g. commodities, oil, gold, energy), and a store of value asset (cannot be consumed or generate income but still has value, e.g. currency, art). Certain cryptos now hold the properties of all of these making them triple point assets which have not existed before this technology breakthrough. 
  • Information asymmetry is rampant around digital assets and cryptocurrencies. What this means is there are lots of different people participating in this market from all around with world with wildly different levels of comprehension and unequal access to information. The prevalence of misinformation creates opportunity. 
  • There are many risks in this space. While most of the same risks in the traditional asset space carry over to the crypto world this space carries some unique risk of its own from 24/7 live trading to uncertain regulatory environment and politics to the overall newness of crypto as an asset class. These risks should be well understood before participating in this space.

Questions from Q&A

  1. “What is the environmental impact of cryptocurrency?”
  2. “You’ve already covered how Crypto fits in with the environmental aspect of ESG, but how does it fit in with the social and governance aspects?”
  3. “Compared to ETFs, what is the expense ratio for investing in Crypto? If invested through Willow, is there fee % of the investment or a one-time fee?”
  4. “Are the gains taxed the same as stocks? For example If you “sell” and convert the Crypto gains to USD after 1 year, would you be taxed at a capital gains rate?”
  5. “Are there ETF equivalents for diversified crypto, based on varying levels of risk tolerance? Are there options to invest in Crypto through an IRA/401K?”
  6. “If we already have assets in another wallet, can we transfer them to your management without selling first/capital gains?”
  7. “Is Authy more secure than google authenticator and if so, why?”
  8. “How does mined Crypto get to an exchange?”
  9. “As investors and not miners, how are you able to participate in buying cryptocurrency?”

If you are interested in the Willow Crypto SMA, please click here or give us a call.

Best regards,

The Willow Team
+1 413 236 2980

Willow Crypto: An Introduction & Open Q&A

Willow Crypto: An Introduction & Open Q&A

See below for our Willow Crypto: An Introduction + Open Q&A Summary points below the video.

Willow Crypto: An Introduction + Open Q&A Video Summary (April 2021):

  • Back in the early 90s, when the internet first started, there were big names in investments who were saying that the internet wasn’t going to impact our lives that much. Alexandra was able to experience the revolution that the internet build-out provided us and now, we can all see the net effects. We liken the experience of what Alexandra had back then to the groundswell that we think is just beginning with digital assets. We already see the impact of the potential of what this can do. More and more institutions are adopting crypto and putting their money towards building infrastructure on digital assets. The stock market was created well over 100 years ago now, and crypto could possibly be the next iteration of markets in some ways. The investment thesis for us, more than anything else, is to get into the infrastructure, this is going to change the face of business much like the internet did. We’re currently in the phase of institutional adoption where you’re starting to see major, international companies dedicating internal resources to figuring out how to use this technology and integrate it into their business. These early players can see that there is a lot of potential for cost savings, efficiencies, speed and security, as well as possible collateral. It’s still conceptually being built out, but we think the potential is pretty significant.
  • A study on the potential impact of blockchain technology done by McKinsey shows significant promise. In agriculture, they’re expecting a medium impact on revenue and a significant impact in reducing costs. The impact on the social, financial services, automotive and healthcare industries is also projected to be similar. What gets us really excited about stepping into this industry is that this technology has the potential to unlock all sorts of social, cost, and revenue impacts across the board.
  • A ledger is a record that keeps track of something, a digital ledger or distributed ledger is an entire network of computers that is distributed all around the world. The major difference is that on a single entity backed ledger, you must place your trust in that one entity, as opposed to a distributed ledger where you don’t need to trust one individual, it’s the entire network. The entire network is agreeing that the data on it is in fact correct. Cryptocurrencies are the tokens that work on these distributed ledgers to move value back and forth or to move representation of property or digital or real-life assets that are converted into a token, that is then put on a blockchain so you can trade these tokens via these marketplaces. What really makes this fascinating is that in addition to just sending an accounting unit back and forth, you can also have different contacts, and code on top of that, which means the possibilities are truly endless. What this all ultimately means is that you can do something a thousand times faster or more efficiently, which then allows us to try out new things and create entirely new innovations.
  • When you look at the market capitalization of the entire cryptocurrency space, it is almost two trillion dollars, which in comparison is roughly the size of Apple, with around 55% being Bitcoin. The remaining amount of market capital is in about 9,000 different cryptocurrencies, many of which are not promising, but there are a good handful of these that are extremely disruptive, companies that are tackling some really important problems and coming up with very interesting and innovative solutions, and that’s where we really see the case for investment come up.
  • Back in 1997, there were about 120 million internet users, there are about 130 million Bitcoin users as of January this year. It’s a very similar point as to where we are in terms of adoption for digital assets compared to the internet build-out. What this tells us about current trends and how this is projected out of the next several years is that the number of users may roughly be 10 times what it is today or it will increase exponentially as other types of technology have also gained adoption in a very similar fashion. (For more info look up S Curves or Adoption Curves)
  • There are three core tenants that we try to stick to that have really worked out of us. Firstly, Mindshare, which means that we invest where the developers and builders are actually building and a community is forming. The second, agnostic infrastructure, where we invest in projects that solve challenges such as scaling, interoperability, and security, who are actively making the cryptocurrency space more resilient, robust, and useful. Finally, useful use-cases, we invest in projects bringing new efficiencies to market, solving real-world problems, disintermediating legacy systems, and creating a fairer, more connected and just world. The cryptocurrencies that fit these characteristics are where we ultimately end up investing to create a diversified digital asset portfolio.
  • We are offering a separately managed account that invests specifically in digital assets, the Willow Crypto SMA. We’ve partnered with Gemini Trust Company as our custodian, and Blockchange as our asset management platform. From a security standpoint we feel very comfortable using Gemini because they are under the same exact regulation and reporting rules as our current custodian. All cash, is FDIC insured up to $250,000 and Gemini has what they call “digital asset insurance” that protects from a potential hack. If you are a current client of Willow, we will set you up with an account at Gemini and link it to your brokerage account with us at Pershing so you can wire funds directly in and then have it deployed to our digital asset strategy.
  • As a new asset class, there are different risks out there that might not be present in the financial worlds, but also many of the same risks that are also present in the financial world. The biggest concern that we see is regulatory risk, where we have not had much guidance from the SEC or regulating bodies on how they want us to treat digital assets. There is also volatility risk, and liquidity risk. We do not want people to put a significant portion of their net worth into these spaces. We’re currently having our employees open accounts with Gemini to get exposure to the digital asset space. If you have a long-term time horizon and you can stomach the volatility, then it’s our opinion that it’s definitely worth having some of your assets exposed to this space.

Questions from Q&A

  1. “What is the minimum investment for Willow Crypto?”
  2. “How will you be identifying the promising Bitcoins that belong to those 10 areas: banking, healthcare, energy, supply chain, real estate, etc. These seem to be areas for diversification, is that correct?”
  3. “Why is Bitcoin a risk?” “How is Bitcoin in and of itself different from a risk standpoint compared to the Willow Crypto SMA?”
  4. “What is the availability of digital assets?”
  5. “Can you address the following problems: A utility problem, low barrier to entry, fraud/theft, no regulation, all bubbles eventually burst, blockchain is years from being mainstream?”
  6. “What are the tax benefits of crypto and how does that play into crypto management in the SMA?”

If you are interested in the Willow Crypto SMA, please click here or give us a call.

Best regards,

The Willow Team
+1 413 236 2980