Today, there are more than 12,000 coins and even more data points in the crypto universe. The cryptocurrency ecosystem is showing no signs of slowing down.
How does it compare to the stock market?
There are more cryptocurrencies than stocks in the US right now,” says Matthew Sigel, Head of Digital Assets Research, at VanEck. “But investors don’t have a comprehensive framework for understanding the drivers of the returns within that cryptocurrency market.”
Sigel sat down with Action Alerts Plus Portfolio co-manager, Bob Lang, as part of our FREE webinar, Beyond Bitcoin and Metaverse: Crypto Categories Investors Should Know.
Editor’s Note: The webinar was recorded on January 28, 2021.
Topics include crypto’s Back to the Future moment, key crypto categories explained, DeFi vs. traditional finance, monetizing the Metaverse, and so much more. Beyond Bitcoin and Metaverse: Crypto Categories Investors Should Know, is brought to you by our partners at VanEck.
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More About Our Panelists | VanEck’s Matthew Sigel & Bob Lang from Action Alerts PLUS
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- 00:00:45 Digital Asset Categorization: How Crypto Classification Benefits Investors
- 00:07:15 DeFi: What It Is, How It Works, Subcategories Investors Should Know
- 00:11:00 Cryptocurrency Exchanges Explained, Risks, and Opportunities
- 00:13:35 Store of Value: How Should Investors Think About Bitcoin Vs. Other Altcoins
- 00:19:50 What’s Driving Activity Between Credit Card Companies and Cryptocurrency Giants?
- 00:23:20 The Metaverse’s Open and Closed Ecosystems Explained
- 00:25:35 Crypto Is Having Its ‘Back to the Future’ Moment
[00:00:05.16] Bob Lang: The cryptocurrency world is evolving fast. There are now over 12,000 coins in the crypto ecosystem. And with so many coins and even more data points, a rigorous classification system is becoming increasingly essential for investors to structure sound investment decisions. So what are they, and which digital asset categories offer the biggest opportunities and risks short term and long term?
[00:00:28.86] Hello, and welcome to Beyond Bitcoin and Metaverse– Crypto Categories Investors Should Know. I’m Bob Lang. Joining us today is a leading expert who spends his day in the crypto universe– Matthew Sigel, head of digital assets research at VanEck. Thanks for joining us today. So let’s get right to it.
[00:00:46.99] First, Matthew, what is digital asset categorization, and why is it so important to sort out the crypto world in this way?
[00:00:54.27] Matthew Sigel: Traditional investors have been trying to measure performance versus benchmarks for a long time. And one of the tools that help them achieve that is by breaking down the equity markets into sectors like technology, financials, consumer staples, telecom, et cetera. And that not only gives individual investors a chance to express a particular view on the sector, but it also gives diversified portfolio managers better information sources so that they can understand the drivers of their performance and make adjustments to reflect their views on sectors or to understand what stocks are driving the performance of an individual sector.
[00:01:40.53] So it’s much the same in the case of cryptocurrencies. There are more cryptocurrencies than stocks in the US right now. But investors don’t have a comprehensive framework for understanding the drivers of the returns within that cryptocurrency market without this type of categorization framework that we’ve developed. So we’ve tried to introduce eight different categories that can be used by traditional investors or crypto investors, much the same way that folks use the GICS Level 1 Index from S&P. And those sectors are now trackable on Bloomberg. And we think they give a lot of information to investors to understand the performance drivers within this vast crypto ecosystem.
[00:02:28.71] Bob Lang: Well, these are distinct non-overlapping categories that form the building blocks for new a crypto classification scheme at VanEck. Can you tell us more about how these benefit investors?
[00:02:39.18] Matthew Sigel: These eight cryptocurrency categories that we’ve developed at VanEck are distinct, non-overlapping sectors that will give investors a better window into what’s working and what’s not in the broader cryptocurrency market. So we think that investors are going to use these categories to express their views on a specific sector within cryptocurrencies and also to better understand how their diversified portfolio is acting by understanding the differences between how these end markets are acting.
[00:03:16.59] Bob Lang: Are there competing views on the categorization of crypto, and do you see, Matthew, these categories continuing to evolve?
[00:03:24.48] Matthew Sigel: One of the challenges that we faced when deciding on the methodology for this type of taxonomy was whether to make the categories mutually exclusive. That is, many of our competitors have introduced more of a basket-type approach, so collections of cryptocurrencies form an investable basket. But oftentimes, one cryptocurrency will fit into more than one basket. And that makes it a little more challenging to understand the broader performance dynamics within the space. You might not get a full view of what’s happening in a category if the coins that comprise it are also part of another category.
[00:04:09.55] So I’d say that was one of the big decisions that we had to make, which was making these categories mutually exclusive. Another challenge has to do with just how fast-moving and flexible this space is. Many of these coins are open-source software projects whose final destination is still unknown. And it’s possible that the category that they’re in now may not be the one that they’re in tomorrow.
[00:04:37.09] So this exercise is a recurring one, requires a lot of maintenance, continual upkeep. And we should expect the categories to change over time and the constituents also to change. And investors can understand those changes by going to the website, the MVIS website, or the VanEck website, where the index categories are released monthly.
[00:05:01.02] Bob Lang: Would you say, in effect, that these indices with common characteristics and value in measuring their performance as a group, and are all indices investable?
[00:05:10.84] Matthew Sigel:: On top of this crypto classification system that we’ve unveiled, we’ve released eight separate indices. So we’ve chosen the four most investable categories. And then for those categories, we’ve launched two indices for each of them, so a broad index that captures all the coins in that category, over $250 million market cap, and then a leaders index, which is the same category coins but a larger market cap requirement, $1 billion and up. And then we’ve introduced an invest-ability component. So a coin cannot make it into the leaders’ category unless it is traded on one of the top-tier cryptocurrency exchanges and custodied by one of the top cryptocurrency custodians.
[00:05:55.34] And so in that way, the leaders’ indices represent a true investable benchmark that investors can use to measure their own performance and also to measure the performance of the categories versus…
Read More: Bitcoin, Metaverse, DeFi, Infrastructure and Other Crypto Categories Explained – FREE
