The launch of SwissOne Capital is timely. Historically, crypto-assets have been highly correlated – that is, the prices of the top coins have moved up or down mostly together. However, the past 12 months have seen correlations steadily reduce as the market matures. Now, individual coin prices behave far more independently. SwissOne Capital’s Head of Research, Kenny Hearn, attributes this to an increase in the quality of crypto projects. He commented: “In previous years, price movements have been tightly coupled to Bitcoin. It led, and all the other coins followed. Now, we see more high-quality projects in the top 50 doing their own thing. These are substantial technologies, with potential for real impact. Most of the lower quality ‘alt-coins’ have been shaken out, so holding the top 50 is a smart way to capture the upside of a variety of different crypto-assets.”
This increase in quality coincides with an overall bullishness in the crypto markets. Crypto advocates point to new technologies that will increase mass adoption and value capture. Facebook’s launch of its digital coin, ‘Libra’, promises to be the biggest cryptocurrency adoption event in history, onboarding up to 2.4 billion users. And in the financial sector, the coming ‘tokenisation’ of equities could potentially convert large amounts of wealth into crypto-assets.
This optimism is borne out in the numbers: in the year-to-date, Bitcoin is up 195%, while the top performing coin in 2019 is Binance Coin with 501% growth. During the same period, the S&P500 has grown a meagre 9.8%. SwissOne Capital’s stance is summed up by CEO, Steffen Bassler: “Their relative growth makes the inclusion of crypto-assets in a portfolio a necessity in this lukewarm economic environment. The risk/reward profile is asymmetric. The downside risks are known, but the proven massive upside can no longer be ignored. Including crypto-assets in a balanced portfolio can substantially boost the performance of the entire portfolio… even a small weighting in crypto-assets will create material upside, with negligible portfolio downside risks.”
Crypto-assets have historically been a volatile asset class, and it has been difficult to mitigate the risk to a single project. However, with the increase in quality of the top coins and the arrival of SwissOne Capital, it appears that investors could now gain safer exposure to the enticing returns of the broad crypto market.
