Jeff Park from Bitwise Asset Management argues that traditional investment models are incompatible with cryptocurrency and suggests more suitable strategies.
Comparison with Traditional Systems
Park points out that cryptocurrencies require a different approach compared to traditional finance. He notes that unlike the models used by David Swensen, who allocated up to 70% of capital to alternative assets, liquidity in crypto investments generates returns. For instance, in April 2024, even as Bitcoin fell by 7%, market-making strategies were annualizing at 70%, while arbitrage yielded around 40%.
Mistakes in Venture Financing
Despite clear examples, many institutional investors continue to invest in venture funds in cryptocurrency, which Park sees as a mistake. He argues that trading volumes in the cryptocurrency market significantly exceed what venture investments could ever provide, noting that crypto trading reached $2.5 trillion in May alone.
Volatility as an Asset
Park emphasizes that traditional finance views volatility as risk, yet in cryptocurrency, it opens up constant opportunities. He claims that if the S&P 500 had realized volatility at 70%, return expectations for private equity would look entirely different. Therefore, volatility in crypto investments should be viewed as an advantage.
Park states that for successful institutional investments in cryptocurrency, it is necessary to abandon outdated models and learn to leverage the liquidity of this market.
