In the decade of 2020, we'll see the growth of alternative investment vehicles as a compliment to legacy asset-building classes that have been around since the 1900s - such as equities, bonds, and real estate.
This piece compiles a list of alternative investment vehicles, notable companies, and opportunities within the space, alongside my thoughts.
This is not investment advice, nor is this meant to serve as a complete summary - I'm learning just as much as you are!
De-Fi stands for decentralized finance within crypto and there's a ton of use cases:
One neat use case is that you can earn interest from your crypto (lending). Similar to how a bank might lend you or your business money, you can do the same thing by lending your crypto to others and making interest in return.
The market for De-Fi and lending crypto has been growing tremendously. Compound, a startup backed by a16z, serves as a decentralized lending protocol running on Ethereum that allows anyone to lend or borrow crypto assets directly from their wallets.
However, the challenge for a lot of people right now is that there are high fees associated with lending out your crypto. This is because most De-Fi applications run on Ethereum. The more Ethereum is used, the higher the fees are (referred to as "GAS" fees, which are one in the same as transaction fees).
This reddit thread breaks down some of the napkin math behind lending crypto:
"I recently supplied just $500 of USDC basically just to learn the ropes. I was doing the coinbase earn steps so got a little free ETH for gas. There are gas fees to enable the market, and then fees to supply your collateral. There's also fees if you need to transfer your currency to the wallet you'll do the lending on. Or fees to buy the currency into your wallet. But, even with all of that if you time your transactions to lower fee times you should be able to get setup for about $20 maybe. So in the end I don't really regret it but it would be a year or so to get that money back so doesn't really make sense to do. You're probably better off just reading about it or watching a video. Those are just some of my thoughts since it sounds like we have some of the same motivations."
Note: You don't have to use Coinbase to earn crypto, and you can save on fees using Metamask. I won't go into this here, but I'll cover my learnings/approach in the next couple of posts.
Although there are "high" fees associated with Ethereum right now, I'm incredibly bullish on Ethereum as a whole.
This video by Vitalik and ETHGlobal is a great resource that outlines how they're planning on scaling:
These descriptions have been sourced from the respective organization's website:
Companies are building alternative asset classes across appreciating assets within private industries - whether it's wine, shoes, art, and more.
I've seen Anthony's tweets on my feed for a while, and his approach to Vinovest is extremely interesting.
"Wine has a higher risk adjusted returns than any other alternative asset class, and has outperformed the S&P for the past 30 years, including during downturns".
Other than wine, here are a couple of other asset classes that can serve a similar function:
I've also been thinking of a formula of building out an alternative asset class below:
If you know of any other companies that are in this space, feel free to DM me on Twitter or LinkedIn and I'lll add them to the list.
I made my first "angel" investment in December 2020 with Republic as a non-accredited investor.
With the rise of crowdfunding within crypto, I'm also interested in seeing founders adopting crowdfunding models as viable ways of raising capital. One notable example can be the Co-Founder of Udemy, Gagan's new startup where they've recently raised on Republic according to their Tweets.
* One Small Note: The SEC recently raised the limit on Regulation Crowdfunding from $1.07M to $5M, making it easier for startups to raise money directly from non-accredited investors.
I bought a Tyler Herro digital collectible on NBA Top Shot a couple weeks ago, and I'm really impressed with the experience. All digital content is going on-chain, and the team over at Dapper Labs (behind Cryptokitties) have been an important presence in bringing mainstream adoption of NFT's and crypto through games.
There's already a huge market for physical items that appreciate in value: whether it's Pokemon, Yu-Gi-Oh! cards, sports cards, clothing (Supreme), art - you name it.
We've also seen major gaming companies like Ubisoft launch Rabbids collectibles on the blockchain, and I wouldn't be surprised to see larger players such as Pokemon enter into this space as well, and it's only a matter of time.
This space is changing and evolving rapidly, and opportunities to view digital collectibles as an investment has already arrived with NFTX, an NFT index fund.
With NFTX, it's possible to create and trade funds based on your favourite collectibles such as CryptoPunks, Axies, CryptoKitties, and Avastars, right from a DEX such as Uniswap.
Articles that I'm going to read to learn more about NFT's and Digital Collectibles:
There are great resources out there that describe what rolling funds are which I'll link below. If you're an accredited investor, you have the opportunity to invest in the next generation of emerging fund managers or what we call "micro-vc's".
The one thing that I see is that these people starting rolling funds typically have their own distribution channel to source directly from their audience.
Resources to learn more about rolling funds:
I learned that crypto is here to stay within "alternative " asset classes - whether it's decentralized finances, collectibles, or crowdfunding.
I'm not quite sure how I feel about the word "alternative" either. Crypto is - and will be mainstream this decade.