DAA Manager Insights: Solidum Capital
Benjamin Franklin said that an investment in knowledge pays the best interest. This saying goes hand in hand with Solidum Capital’s mission of educating people about the crypto world. As they point out in this interview, the more you know about the topic, the more you are aware of its potential.
When you speak with your clients about alternative investments, is the crypto world already understood as a new asset class?
Our retail clients view the crypto-economy as an exciting new investment opportunity, and we can definitely say they perceive it as a new asset class. The problem is nobody bothers to learn more about it; they just want to “join the party.” We are putting in a lot of effort to educate our investors about the crypto world.
When I speak with our institutional investors about cryptocurrencies, the vast majority still considers them a fad. The problem is the same as with retail investors: they formed their (in this case negative) opinion without obtaining adequate knowledge on the topic. This tells us that there is still a lot of upside potential in this emerging asset class.
Your DAA is well diversified, which suggests that you are not “betting” on any single coin. How did you come up with the current structure of your DAA?
The crypto world is in a very early stage, and no one really knows which coins will achieve mass adoption and become real winners and which will be left behind. I know many will disagree, but even bitcoin’s long-term existence is not guaranteed.
That’s why we believe that broad diversification is essential.
We have developed a three-step investment process and thoroughly analyzed all digital assets currently available on the ICONOMI platform. The result is the selection of twenty-five assets we believe have the best potential to be winners. The number of holdings in Solidum Prime will not be constant; our target is to have twenty to thirty of the most promising assets in our DAA at any given time.
We have also conducted extensive testing and analysis and concluded that an equal weight investment strategy is the most suitable for the crypto world. In the case of Solidum Prime, this means that each asset is currently assigned an equal weight of 4 percent. This offers investors better diversification and a more balanced allocation. It also creates an opportunity for all included digital assets to contribute equally to performance and provides more exposure to smaller assets with higher growth potential.
The crypto world is very dynamic. Obviously, there is a difference between projects that have already been running for a year or more and projects whose coins just started trading. Which side will your DAA cover?
We intend to cover both sides in Solidum Prime. As stated before: no one knows which projects will become the real winners. One could argue that more mature projects have a better chance of success because of first-mover advantage, but in reality, no one knows if these projects will be able to capitalize on being first to market. History shows us many examples where first-mover advantage did not lead to lasting success, such as search engines and social networks.
So, regardless of maturity, we only invest in projects with clear value propositions and well-defined, viable business strategies. We also conduct a thorough review of the key people involved in the company. The team must have the knowledge, experience, and skills necessary to operate and expand the business. A great idea without a strong team has no perspective.
What do you see as a very positive outcome for crypto and a very negative one?
I’ll start with the potential negative outcome. It is possible that many startups in the crypto world won’t be able to realize their potential. In this scenario, many ideas will prove not to be revolutionary after all, and companies won’t be able to scale their businesses. They won’t become profitable and will end up just burning the money raised via ICOs. If this happens on a large scale, it could shift investors’ current positive perception of the crypto world. Such a development would slow progress, but I think we have already crossed the Rubicon. The crypto world is here to stay.
On the other side, a very positive outcome would be rapid mass adoption of blockchain technology. In this scenario, businesses and individuals will realize the many benefits of blockchain technology, and new crypto tokens will be issued regularly for many different purposes. Governments across the world will introduce stimulative legislation that will foster even more innovation and growth.
We firmly believe that the crypto world has a bright future, and we are confident that blockchain technology will become an integral part of everyone’s lives. Crypto assets are already emerging as a new asset class.
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