Investments in shades of gray
- Phil Bonello is the research director for the $ 44 billion asset manager Grayscale Investments.
- Grayscale recently launched new funds to invest in five cryptos in addition to bitcoin and ethereum.
- Bonello shares the risk / reward of the five digital tokens and three emerging encryption opportunities.
- See more stories on the Insider business page.
In the cryptographic world, bitcoin and ethereum are names that come up all the time. But in reality, the investable universe of digital assets extends well beyond the two dominant tokens.
Grayscale Investments, the world’s largest cryptographic asset manager with over $ 44 billion in assets under management, innovated last week by launching five investment funds to track Basic Attention Token (BAT), Chain link (LINK), Decentraland ( MANA), Filecoin (FIL) and Livepeer (LPT).
Although these digital assets occupy quite niche segments of the crypto market, the gray scale launched them in part due to popular investor demand, according to Michael Sonnenshein, the company’s CEO.
“Many investors within the existing grayscale family are really excited about new product launches and even in the past few days they have already accumulated millions and millions of dollars in investor demand,” he said on CoinDesk TV on Tuesday.
So why are investors pouring millions of dollars into these virtual assets? And how do your investment merits compare? What are some of the specific cryptographic risks that investors should take into account?
To answer these questions, Insider asked Grayscale research director Phil Bonello to analyze the risk and reward profiles of these digital tokens and share other emerging encryption opportunities he is looking at.
The interview below was conducted by email and edited for greater length and clarity.
What is your experience and how did it get you into the crypto space?
I started my career working on Internet of Things (IoT) strategies for industrial companies. This interested me in machine-to-machine communication more broadly. On a message board, I saw someone talking about Ethereum as a secure, general-purpose network, and at the time, it looked like it could be a really interesting tool for these IoT use cases. This took me to the rabbit hole. Later, I joined Ikigai Asset Management to lead crypto investment research.
When did you buy your first cryptocurrency?
I bought my first crypto – ETH – in 2016. I started with Ethereum and then I was completely convinced of the potential of Bitcoin as money. I think that many people follow a tortuous path when learning about cryptography.
Where do you think bitcoin will go from here?
I am constantly looking at a variety of key metrics and catalysts. We are still seeing new institutional products coming onto the market and institutional adoption is proceeding accordingly. This is a much more institutionally oriented Bitcoin market than in 2017, which is reflected in a variety of market data and online data. This bodes well for Bitcoin and I assume that we will see less volatility than previous market cycles. [Bitcoin’s] The 30-day volatility is about a third of the 2017 peak.
Why did the gray scale decide to launch the five new trusts?
These five projects have been on the gray scale radar for a long time. These are projects that are highly demanded by the market or that we consider important building blocks for the cryptographic space. We believe that, collectively, these products are strong representatives of how the digital currency and the blockchain industry are working to address the difficult technical, social and financial challenges.
Can you talk about the merits and investment risks of each of the five cryptocurrencies?
Courageous – The Brave browser has experienced impressive growth and now has more than 25 million monthly active users. The functionality of Brave’s token, Basic Attention Token (BAT), is increasing as Brave plans updates, such as a native crypto wallet and a decentralized exchange aggregator.
Chain link – Oracles are often a bottleneck for decentralized applications because it is difficult to prove the integrity of data outside the chain in decentralized protocols. But many decentralized applications require robust data feeds. Chainlink is the most widely used oracle service in decentralized finance and LINK is one of the best performing assets since 2019.
Decentraland – Virtual worlds like Second Life or World of Warcraft are immensely popular, but are centrally operated, which gives organizations excessive power over users. Decentraland is a decentralized virtual world that offers users the true ownership of digital products and the freedom to interact without third parties. Atari recently announced that it will build a virtual casino at Decentraland and popular musicians like 3LAU have already performed concerts. MANA is the native currency of Decentraland.
Filecoin – Filecoin is a decentralized storage and distribution network that aims to tackle the $ 46 billion dollar cloud storage industry and currently facilitates more than 5 petabytes of storage. Filecoin connects customers and data storage providers from around the world to reach an efficient and robust market for data storage needs. This market is growing rapidly as streaming video becomes more common, digital resolutions increase and more connected devices go online. FIL is the currency of the chain and the guarantee used by storage providers to guarantee their good deeds.
Livepeer – Livepeer is a decentralized video transcoding network that aims to allow video streaming at a reduced cost, resilient and resistant to censorship, which today consumes 80% of the Internet bandwidth. Video transcoding is a necessary element to build a decentralized application with integrated video streaming and we think Livepeer has the best solution so far. LPT is the asset that is used as a guarantee to protect the network and ensure the good work of service providers.
Are you optimistic about any other emerging cryptographic assets in addition to the five we just mentioned?
The grayscale analyzes a variety of factors when considering emerging cryptographic assets, including support for a digital asset across exchanges and regulated markets, what kind of real-world applications a protocol can have, how widely adopted a protocol is or can become a day we believe that a product will serve the best interests of the investing public, the value of a product to the investing public, how different the product is from other grayscale offerings and other considerations. DeFi Applications, decentralized back-end infrastructure, and games are key areas that we continue to monitor.
Any additional thoughts you would like to share about the cryptographic space?
The cryptographic space has never been more exciting. The biggest problem that the space faces is the dimensioning to meet the demand. It is a bandwidth problem that is being solved in real time. For an emerging industry, it is a good problem.