In a new interview with Raoul Pal of Real Vision Finance, the co-chief investment officer of Pantera Capital Joey Krug says outside of the two largest cryptocurrencies by market cap, decentralized finance (DeFi) is the most appealing space to invest in.
“I think DeFi’s the biggest next investable asset area in this space. In any portfolio, I want to have exposure to both decentralized exchanges and lending protocols.”
Krug adds that fundamental growth in the protocol is a key factor used when picking a DeFi asset to invest in.
“…What I’m trying to do is I’m trying to buy the protocols that are seeing the most growth in user’s traction, volume, etc adjusted for valuation.”
During the same interview, BlockTower Capital’s chief investment officer Ari Paul, says portfolio construction involves a ‘bottom-up analysis’ and studying money flows.
“You can say we believe in DeFi, let’s then do some bottom-up analysis and see what are the highest quality projects in that. We want to have a certain amount of exposure to that as a theme.
“Another angle, that’s a more trader angle is thinking about money flows.
“…So for example, a meaningful percentage of all new retail onboarding are happening on Binance right now. Well, when a Binance new customer onboards, they’re likely to buy assets listed on Binance. Now, Binance has a lot of assets, but there are other exchanges, some of Japan’s biggest exchanges, for example, that only give you 10 assets to choose from. If you have a lot of onboardings onto those exchanges, probably those 10 assets will do well.”
Jeff Dorman of crypto fund Arca says he believes the term “altcoin” is too broad in a space that has grown widely and deeply in the last few years.
“Now, the term altcoin doesn’t even really make sense anymore, because it’s really different sectors in different pockets of digital assets that do different things.”
Dorman adds that there needs to be more specificity as different digital assets now have distinct goals and purposes.
“…Don’t classify everything as an altcoin. Don’t think of everything as a cryptocurrency. If somebody presents something to you, break it down in your head. Okay, what sector is this? Is this gaming? Is this DeFi? Is this Web 3.0? Is it something else? What does the token actually do? Is the token not attached to anything and we’re just going to figure it out later, or is it actually attached to something? Is there real cash flows? Is there a real yield? Is there a real use case for it?”
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