Markets Now Recognize Bitcoin as Asset - Tokens Magazine - XTokens Magazine

TOKENS Magazine 2022 print edition https://tokensmagazine.com/images/2022/21-asset-bitcoin.pdf

Bitcoin is Asset
A R T I C L E A D A P T E D F R O M
/ J A M E S M C D O N A L D
/ P R O D U C T M A N A G E R
/ D A T A A N D A N A L Y T I C S
/ L U K K A
Applying a sector classification to digital
asset class will increase access for
market participants through the
transparency, clarity, and stability.
Asset sector categorization allows
investors to overlay traditional portfolio
management methods within the
portfolio construction process, allowing
investors to analyze and compare risk
and return metrics across various
sectors,
Broader adoption of digital assets
supplements the growth of the
sector, as well as adding efficiency
to the portfolio management
scheme. Investors have a need to
examine historical returns to see
how specific assets have performed
compared to their sector.
A standardized classification system
allows for tailored and rigorous
controls in portfolio mandate
documentation and subsequent
portfolio monitoring. In addition,
classification empowers professional
money managers and clients to
specify more granular controls for
investment managers within
traditional agreements, such as an
Investment Policy Statement or
Financial Plan.
A hypothetical investor may
compare the 12-month historical
performance and standard deviation
of returns for assets within the
Smart Contract Platforms and
Scaling sectors. A manager-driven
macro-level view of the
fundamentals within the digital
assets market, could inform an
investment thesis for overweighting
or underweighting an allocation to
the scaling sector.
Benefits of a Standardized
Classification System
h t t p s : / / l u k k a . t e c h / b e y o n d - b i t c o i n - i n c r e a s i n g - a c c e s s i b i l i t y - t h r o u g h - d i g i t a l - a s s e t s -
c l a s s i f i c a t i o n - s y s t e m /
Investors are able to gain exposure to
certain sectors via sector-specific ETFs
in the stock market today, they may
demand similar tailored exposure to
digital assets.
As regulatory clarity unfolds, investors
may see the introduction of products
that enable quick exposure to specific
corners of the digital assets market.
Investors may choose from an array of
products that provide exposure to a
specific market segments, such as
Metaverse ecosystems, Play to Earn
tokens, or DeFi platforms, allowing
investors to create more diverse and
efficient portfolios.
Adoption of a standardized sector
classification system will lead to new
digital asset-specific indices, as well as
provide a standardized point of
comparison for benchmarking.
Self-directed investors could opt to
invest in digital assets and gauge their
performance against an index that
tracks the broader market, such as the
S&P Cryptocurrency Broad Digital
Market Index (SPCBDM). From another
side of the market, a Fund of Funds
Manager may look to construct a
portfolio of active digital asset hedge
funds primarily based on previous
performance against the same SPCBDM
index benchmark.
The application of a standardized
classification system allows for tailored
and rigorous controls in portfolio
mandate documentation and
subsequent portfolio monitoring.
A classification system removes
significant barriers to entry for new
investors and makes the asset class
more digestible at all levels of market
participation. Bypassing crypto-jargon
and viewing the market via a
standardized digital assets sector
classification system helps investors
understand their investment and
increases transparency, stability, and
participation.