“3 observations and a chart” on the latest in the digital assets sector
The time is (still) now…and you (still) haven’t missed it
Digital assets market up more than 78% in 2024 after +106% return in 2023 – still early opportunity to gain exposure in diversified multi-strategy fund focused on risk management
The CCi30 Cryptocurrencies Index, a rules-based index tracking the 30 largest cryptocurrencies by market capitalization, was up more than 78% in 2024. This follows the index being up 106% in 2023. Investors can gain exposure to the sector through Arena Digital Capital Partners, LP, a liquid multi-strategy fund of funds. The fund offers investors diversified and curated exposure to the commercial promise of blockchain and digital assets technology while focusing on risk management in order to compound outsized returns over market cycles. We continue to think we are only in the first or second inning of the investment opportunity in digital assets generally and that the current bull phase in the sector has significant room to run; investors have not missed the window to gain exposure to the sector and now is an opportune time to invest.
“Cryptocurrency” is the wrong moniker: “There is Bitcoin and there is everything else” – altcoins offer equity-like asymmetric upside on commercial application of blockchain technology
“Cryptocurency” is the wrong name or description for the digital assets sector. There is (essentially) one cryptocurrency: Bitcoin. BTC, which makes up ~$1.9T of the ~$3.3T market capitalization of digital assets, is widely considered to be “digital gold”; a digital “store of value” asset that can plausibly be referred to as a “cryptocurrency”. Everything else in the digital asset sector – the “altcoins” – is a quasi-equity interest in a blockchain-based technology or software business. These businesses are developing commercial applications that may be faster, cheaper and more effective than existing analogs and seek to disrupt trillions of dollars of markets. The market capitalization of these early stage companies (excluding Ethereum and stablecoins) is on the order of ~$800 billion while the market capitalization of the industries they are trying to disrupt is more than $40T in the technology and financial services sectors alone. We encourage investors to have exposure to both (e.g., BTC ETFs and Arena Digital Capital). Bitcoin (BTC ETFs) has tremendous tailwinds for continued adoption and use as a digital store of value. Altcoins (Arena Digital Capital) have tremendous asymmetry to the upside on commercial viability of blockchain-based applications.
US becoming more crypto-friendly by the day – President Trump continues to appoint crypto supporters to significant government roles
President Trump continues to back up his promise that the US will be the center of innovation in blockchain and crypto assets with crypto-friendly appointments at the SEC and in the White House. SEC Chair nominee Paul Atkins is widely known to be pro-crypto, including having served on the Board of Advisors of the Chamber of Digital Commerce and on the Token Alliance, a tokenization initiative of the chamber. White House “AI/Crypto Czar” David Sacks is a renowned venture capitalist who has been outspoken in his support for digital asset innovation. We very much think that “the boot has been taken off of the neck of innovation” in the United States. Blockchain entrepreneurship will be welcomed in the United States and allowed to thrive. Developers will no longer be swimming against the current and investors will be incentivized to commit capital to the sector. We think creating a friendly environment for innovation in digital assets and blockchain in the deepest and most robust capital, business and consumer markets in the world is a major tailwind for investment in the sector.
Chart of the Month – Roaring Bull Market in New Crypto Sectors and Themes Like “AI & Crypto”
24h and 7 day data to 12/16/24 shows enthusiasm for emerging projects at the intersection of AI and blockchain; bull market in “non-majors”
Arena Digital Capital Partners is a liquid evergreen fund open to monthly subscriptions. We are always happy to discuss further with you or investors you think may have an interest in the sector. Please reach out to Bill Cline at williamc@arenadigital.capital.
Sincerely,
The Arena Digital Capital Management Team
Michael Schwartz, Michael Prober & William Cline
Arena Digital Capital Management was founded in January 2022 by three experienced traditional finance hedge fund professionals who have been deploying personal capital in the digital asset ecosystem since 2018. The team has managed billions of dollars of capital for high net worth individuals, family offices, and institutions ranging from pension plans and endowments to sovereign wealth funds. We have worked closely with institutional consultants, RIAs, and other advisors in serving their clients.
In May 2022 we launched Arena Digital Capital Partners, with the goal of providing a multi-strategy investment vehicle to access the digital asset ecosystem. Our mandate is to offer broad exposure across the growing digital asset and blockchain sector with an appropriate level of diversification, professional oversight, and manager selection. Our collection of skill sets and our history in the business allows us to understand, assess, and engage with the practitioners of this nascent asset class with a level of diligence required to be responsible stewards of capital. We are happy to periodically share our observations with you.
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