In the Arena | May 1, 2023
Updated: Jun 1
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.
NFT Technology demonstrably improving financial rewards for creators
One of the promises of blockchain technology and the use of Non-Fungible Tokens (NFTs) is the improved ability for creators to realize returns on their work and remove rent-seeking middlemen from the chain of commerce. In the last two years, NFT marketplaces have paid out nearly $2 billion worth of royalties in secondary sales to creators. Compare that to web2, where Meta, for instance, earmarked $1 billion for creators through 2022. This comparison is all the more stunning considering that Meta’s platforms – Facebook, Instagram, WhatsApp, and more – have around 3.74 billion monthly users compared to the estimated tens of millions of web3 users today.
NFTs continue to enhance consumer engagement – The Wolf of Wall Street and the California DMV
A number of consumer brands, Hollywood production companies and state governments are using NFTs to engage with their consumer base. “Experiential” NFTs allow companies to assign rights to token holders, such as royalties or community access, that creates a continuing connection beyond the original point of sale. For example, the production company of The Wolf of Wall Street is deploying NFTs to help monetize the fan base and protect its intellectual property from piracy. Wolf NFTs give access to collectible scenes from the movie and exclusive membership to online communities that include participation in fan voting on themes and stories that might serve as the basis for sequels or spinoffs.
Governments are participating as well. The DMV in California is digitizing all of its automobile titles and putting them on the Tezos blockchain. Motorists will be able to easily transfer titles using a computer app managed by the DMV. NFTs are enhancing and growing the ways that companies and governments are able to engage and maintain connections with larger and more targeted communities, a key use case are able to engage and maintain connections with larger and more targeted communities, a key use case for blockchain technology.
Regulators outside the US continue to welcome digital assets – EU Passes Comprehensive Crypto Law
Efforts by US regulators to quash the digital assets sector in the US is providing an opportunity for overseas markets to take leadership roles in providing regulated environments where digital assets companies can operate. Lawmakers in the EU just passed a new crypto licensing scheme (Markets in Crypto-Assets or MiCA) that makes it the first jurisdiction in the world to introduce a comprehensive crypto law. MiCA allows digital assets exchanges and digital-wallet companies to offer regulated services crypto law. MiCA allows digital assets exchanges and digital-wallet companies to offer regulated services across the EU and requires stablecoin issuers to hold sufficient reserves. EU lawmakers believe that the
new law puts the EU at the forefront of the token economy by protecting consumers and safeguarding financial stability and market integrity. The market for financial and commercial services is global and we believe that the digital assets industry will continue to migrate and grow outside the US in the face of regulatory hostility in the US.
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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