DAA Manager Insights: Coinbest Group
The crypto world is fast and dynamic. The risk level is high. To attract broader interest, we will need to see more risk-averse products. Our DAA manager Coinbest Group is addressing that very need.
With CBST, you are constructing a “safe-haven” DAA. Can you explain why this is needed and the logic behind it? Is this DAA aimed at risk-averse people?
At Coinbest Group, we believe widespread adoption entails new kinds of investors coming into the crypto-market. Most of these investors want to participate in blockchain technology growth, but they also want to minimize risk. It is for these investors that we created CBST.
We are measuring risk in volatility terms, trying to reduce CBST’s volatility by choosing the most mature assets and looking for a low correlation coefficient among our portfolio’s crypto-assets.
We are measuring risk in volatility terms, trying to reduce CBST’s volatility by choosing the most mature assets and looking for a low correlation coefficient among our portfolio’s crypto-assets.
Our strategy is to maintain a well-balanced portfolio in which the biggest crypto-assets, such as BTC and ETH, are blended with high-potential crypto-assets. We are currently developing a tool, to be released in a few months, with which traditional investors can back-test profitability and the risk evolution of their portfolios if they include our DAA.
Can you share with us some findings about applying risk to the crypto world? Are the most liquid assets also the least volatile? Are there any repeating patterns?
This market has a very limited track record — less than a few months for many crypto-assets. All the studies and tests we conduct are affected by this limitation.
We have detected some negative correlation between an increase in liquidity and volatility, though this correlation is increased if we include a time factor, whereas more time in the market seems to correlate with less volatility.
Your job also includes educating people about crypto and its dynamics. How do you introduce crypto-assets to conservative investors? How do you explain the story, benefits, and risks? Do they need to know about risk metrics?
We introduce crypto-assets as high-potential assets because we trust in the steady acceptance of this new asset class in traditional markets. Mainly, we think these kinds of assets should initially be a small percentage of an investor’s portfolio. As the market matures, that percentage can increase, becoming a bigger portion of total investments.
It’s very important to understand metrics, such as volatility and the Sharpe ratio, for this new asset class, but our main task is evangelizing to professional investors by introducing blockchain profits created by an increase of efficiency due to the reduction of middlemen in all sectors of the economy.
Example metrics:
In the last few weeks, we saw a lot of buzz about Bitcoin development. There was the canceled fork, a significant price drop, etc. What is your view on the biggest holding in your DAA?
From our point of view, BTC is the only mature asset in the market, showing high resilience over the last seven years. We are very aware of the different scalability solutions. We believe Lightning Network is going to be a main player, but other projects, such as RSK (Rootstock), could also boost the use of BTC in a big way.
We remain very bullish on BTC. It is possible that we may eventually gradually reduce the weight of BTC in our portfolio, but for the near future, BTC is going to be our main investment, because all of our indicators are positive, such as Google Trends results indicating high network effect value.
Follow our official channels for more updates and news:
Facebook / Twitter / Reddit / Medium
or log into our platform to explore more DAA strategies.
