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Education and Research

February 24, 2021

Blockchain and Cryptocurrency Resources:

Here is a list of cryptocurrency and blockchain resources that we believe will help anyone who’s looking to get their feet wet. We started off with listing the basics first and as you read you will find more complex ideas with this realm.

This primer is inspired by “Crypto Canon” by Andreessen Horowitz.

Bitcoin White Paper:

Bitcoin white paper was first published in 2008 by ‘Satoshi Nakamoto. To this day, the true identity of Nakamoto remains unknown.

You can start here:

Hash Power is a documentary podcast series that explore the emerging world of cryptocurrencies and blockchain. The first three episodes are essential for you to listen to before you start going deeper down the rabbit hole.

Episode 1 — Understanding Blockchains.

Episode 2 — Cryptocurrency Investing.

Episode 3 — Funding, Forking, and a Creative Future.

What is Cryptocurrency?

Cryptocurrencies are secured digital assets created through decentralized networks based on blockchain technology. Contrary to popular belief, cryptocurrencies, and the blockchain is more transparent than other cash-based currencies making them a poor solution for criminal activity. The infamous Silk Road perpetrators were caught because of the bitcoin blockchain.

Definition of Cryptocurrency by Investopedia

The Future of Money — The future of money, more than a static unit of value- Neha Narula explains how as software and currency combine, the reliance on institutions for security decreases. This new programmable era will allow people to use their money and their energies for more constructive things.

What is Blockchain?

But How Does Bitcoin Actually Work? — Blockchain changing the world for the better: Blockchain is the underlying technology of cryptocurrency. This video further explains how blockchain can assist in solving multiple global issues.

Blockchain allows people to share and store information on multiple platforms globally. An example would be a cryptocurrency, in which Blockchain removes the central authority aspect allowing for transactions to be much more confidential and efficient.

What does it mean to have Bitcoin? For instance, using a communal ledger to track payments between you and your friends. This video is important for anyone interested in learning more about the fundamentals of the technology behind cryptocurrencies.

The 6th Wave of Technology — Venture Capitalist Bill Tai discusses blockchain saying “It’s clear what the promise is: low-friction, very fast, low-cost commerce.” Incorporating blockchain into any type of transaction-oriented business will considerably advance the efficiency in the way governments, businesses, and institutions deliver systems and services to people around the world, at a tenth to a hundredth of the cost per transaction.

Digital Assets Vs. Cryptocurrency

The term digital assets not only includes cryptocurrencies like #BTC and #ETH etc. but also multiple other assets not always classified as currencies. The term digital assets is broad and it encompasses cryptocurrencies, but also refers to any asset in an electronic form. Traditional examples of digital assets include patents, real estate, and stock. Digital assets are stored and tracked on blockchain technology bringing innovation and new applications to multiple industries.

How is blockchain already transforming the world?

Blockchain is the next generation of anonymous secure transactions using cryptography. Specifically, through transactions made with cryptocurrencies, Blockchain’s technology has the potential to change multiple industries globally.

Blockchain is Eating Wall St — Alex Tapscott provides an articulate description of how Blockchain is transforming the economic power grid.

Beyond the Bitcoin Bubble — This New York Times article explains the identity problem we are facing today of granting services like Amazon and Facebook permission to have our information so we can complete tasks. Steve Johnson further suggests that by embracing blockchain’s platform we can revert back to open protocols which allow for more flexibility.

What is DeFi?

DeFi or Decentralized Finance is an umbrella word for multiple financial operations in cryptocurrency of blockchain that is focused on eliminating the middle man.

Detailed explanation of Defi Here — “DeFi Dad” walks through the basics of what is Decentralized Finance (DeFi) and what it isn’t, in hopes of encouraging more participation. He explains how to mitigate risks in this new peer-to-peer decentralized censorship resistance finance system.

What is Yield Farming?

Yield farming refers to the awards that are created from new crypto assets by putting your existing crypto assets to work with lending or staking. Multiple platforms exist worldwide for yield farming sharing the same goal of depositing funds in a smart contract and earning rewards.

This article further explains how stacking the yield allows farmers to generate more yield through specific protocols that issue tokens to farmers providing liquidity to their pool. As a result, yield farmers can earn returns with transaction fees, token rewards, and capital growth.

What is Mining?

Blockchain 101 Part 1: Anders Brownsworth explains the concepts behind a blockchain with an excellent visual example.

Blockchain 101 Part 2: This builds on Part 1 of these series and makes an introduction to private key pairs.

Through complex equations and machinery, miners determine which hardware is best for results based on the type of cryptocurrency they are mining for. This computational process specifically assists in securing the blockchain, which results in newly produced cryptocurrency. The goal is to assure that all the transactions are shown in the digital ledger.

This article uses Bitcoin as an example to show that miners will be rewarded with fees for processing transactions that network users will pay. The specific fees guarantee miners will continue to have the incentive to mine and maintain networking. As competition increases for fees, as a result, they will be lowered once it is divided.

RESEARCH

We put together a research guide to the markets for financial advisors. Please click here to view the pdf file.

NEXT TWELVE MONTH

Last year #Bitcoin was up over 300%. We went back to identify all periods with > 300% return to peer into the future. The results surprised us. The average “next 12 month return” was just -1.5%, (min -74%/max 228%). Note, the median w/b -46.75%. The point? Use caution.

BITCOIN SHORT TERM VOLATILITY IS PERFECTLY IN LINE WITH HISTORICAL AVERAGES

Bitcoin volatility increasing back above historical averages. We watch this closely. Valuation implications: short-term positive as more capital comes in offering price discovery putting downward pressure on volatility leading to more institutional long-term “allocations.

“Stomach Acid” is like Thanos — inevitable

Investment opportunities do not come without some form of “stomach acid” The asset returns are meaningless if investors can’t stomach the volatility and sell at the wrong time. Educated investors are Empowered investors.

Rolling Correlations

Bitcoin is a risk asset. IT IS CORRELATED to risk assets in periods of stress. DO NOT use it as a risk reducer! It is not an equity market hedge during drawdowns. Use bonds or derivatives for that. That said, it can provide diversification during other periods

Traditional portfolio Returns with a small Allocation to Bitcoin

Even a small allocation to #Bitcoin should be part of the asset allocation conversation.

Adding 5% allocation to a 60–40 traditional portfolio

Showing the impact of a small allocation to $BTC out of a 60/40 stock-bond portfolio. 5% to BTC from S&P.

Relative volatility between bitcoin and S&P 500 overtime

The average NTM return for $BTC after the ratio falls below 2.5 is 461%.

Disclaimers:

This material is presented for general information purposes only, and does not constitute an offer to buy or sell securities. This publication does not constitute general or personal investment advice or take into account the individual financial circumstances or investment objectives, or financial conditions of the individuals who receive it. This does not constitute an offer or solicitation to purchase or sell any securities or Funds, nor shall any securities be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.

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