In the Arena | June 1, 2023
Updated: Jun 6
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.
Crypto money vs. Crypto technology – error to conflate
One of the most common misunderstandings that investors have when thinking about the “crypto” sector is conflating “crypto money” and “crypto technology” narratives. They are both valid, use case-driven narratives, but are quite distinct from each other, not mutually exclusive and provide different commercial use cases for different market participants, businesses and consumers. “Crypto money” often refers to the use of digital assets as some form of monetary unit and the related investment ecosystem. Bitcoin is the obvious “crypto money” story as it serves as a digital store of value. “Crypto technology” refers to the peer-to-peer computer networks that permit participants to transact with one another using globally accessible software. It allows anything of value – money, stocks, bonds, IP, votes – to be securely sent on the Internet without the need for a centralized 3rd party. The EY carbon-tracking platform noted below is an example of “crypto technology”. We believe that there are commercial applications for both and that investment exposure to the sector is a call option on the success of both general categories of blockchain commercialization. Moreover, disaggregating the two general categories in the minds of investors and regulators will facilitate productive investment in and engagement with a potentially transformative technology.
Fidelity annual report on digital asset sector shows investor enthusiasm for the sector
Since 2018, Fidelity has conducted an annual study to better understand institutional investors' perceptions of and approach to digital assets. The 2022 study (released last month) was conducted during the significant market decline of 2022 and was based on more than one thousand responses from institutional investors in the US, Europe and Asia. Respondents included financial advisors, high net worth investors, family offices, pensions and benefit plans, and endowments and foundations. Notably, 81% of respondents believed that digital assets should be part of a portfolio; 74% of respondents (up from 71% in 2021) planned to buy or invest in digital assets in the future; and 58% responded that they
were already invested in digital assets. Moreover, 66% of those who expressed interest in multi-digital asset products wanted the investment portfolio to be actively managed. We highlight that despite the challenges and drawdown of 2022, there remains tremendous investor interest in the digital asset sector.
EY (Ernst & Young) launches blockchain-based Carbon Tracking Platform
In early May, EY announced the launch of an Ethereum blockchain-based platform to allow enterprises to accurately measure and track their carbon footprint. Through the tokenization of emissions and carbon credits and an open blockchain ecosystem, businesses and regulators can accurately and verifiably track CO2 emissions and facilitate the use of carbon offsets as companies seek to decarbonize. Such transparency helps businesses tell their ESG story to customers and regulators as net-zero targets are under heightened scrutiny. We note that the commercial use cases for distributed ledger technology continue to develop and address real world problems on a global scale.
Arena Digital in the Media
The Real Maxime Podcast (Crypto-Native Series Episodes) – A Conversation with Michael Schwartz, CEO and Co-CIO, Arena Digital Capital
Michael Schwartz recently sat down with Maxime Seguineau to discuss his journey from M&A attorney to digital asset fund manager, and his comprehensive investment thesis for the digital asset sector. We invite you to listen through the Spotify link below or on other podcast channels.
Chart (Image) of the Month
The following recent Reddit post caught our eye…
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 firstname.lastname@example.org.
The Arena Digital Capital Management Team
Michael Schwartz, Michael Prober & William Cline