Techemy Capital — Set Social Trader AMA Series
This is a transcript of a recent AMA that was held between the Techemy Capital team and the Set community in our Discord channel. The AMA was held on the 9th of July at 6:00PM PDT, 2020.
You can check out Techemy’s Sets here.
If you want to be involved in future AMA’s, be sure to join our Discord channel.
Anthony: Hello everyone! Let’s get started!
Let’s give a warm welcome to the Techemy Capital team (Paul, Clem, Son of Ishtar and Techemist).
Hey Techemy team — feel free to give a quick intro, and then we can dive into the questions!
Techemist: Techemy Capital (TCAP for short) is a boutique investment management company with unparalleled expertise in global blockchain and digital asset investment. TCAP is majority owned by Techemy Group. Techemy has been building companies and products in the blockchains space since 2013 with a focus on key infrastructure. TCAP is the licensed Crypto Investment Management business of the Group.
Techemy Capital Limited is an authorised Financial Services Provider to wholesale entities under New Zealand law. We’re excited to have launched the first of what we hope are many exciting products with TokenSets!
Anthony: How is Techemy working to bring in the traditional finance world to DeFi?
Techemist: Straight for the good stuff — love it! I coined the term Techemy back in 2013. Alchemy + Technology = Techemy. Being the bridge between the old world and the new has been in the DNA of Techemy from the start.
We have been working with a range of institutions for a number of years to understand their use of blockchain tech and what opportunities they are interested in. Out stronghold countries are Japan, Australia, Brazil and NZ. With obviously a lot of effort in North America and Europe.
As an example of whats going on right now in Japan: 63+% of all the wealth is owned by 60+ year olds. It’s a market with negative interest rates and a lack of financial products tailored to 20–50 year olds. Some of the banks and large entities wish to deploy capital into DeFi products which earn a yield. Over there anything over 0% is a winner. We are seeing insurers, lenders, market makers and a lot of corporate treasury collecting dust, doing their due diligence now to under stand the risks involved of yield bearing products.
Inje: With the current DeFi run that seems to be forming, are there any DeFi tokens you have your eyes on? Or are those assets outside of what you’d trade?
Techemist: We have an experimental internal fund with 11 different DeFi tokens since mid January which is up 111% YTD so we have very much been researching this. I helped the Omni Layer back in 2013 for the first ICO and the first DEX. DeFi as a word has only really been around for 12 months.
This is not investment advise and in no particular order: Leverj.io (LEV) for, Melon, Synthetix, Balancer, are my top picks personally. We hope to produce free research on the ecosystem over the next few weeks and months.
What we look for on a Techemy Capital level is longevity and very much infrastructure focused. I really like LINK for example as it’s middleware.
We also like to focus on using the DeFi tech not just speculating on related tokens. We want to create a layer over DeFi that extracts yield without the risk or complication of any individual token. This makes it more suitable for CeFi AuM to enter the space.
Son of Ishtar: In our Proof-of-Concept DeFi portfolio, we also have allocations for MKR, COMP, LEND, KNC, REN, UMA, JRT (in addition to the ones above).
Luffy: What do you think of yield farming? Are these protocols actually being used for anything functional or is this just a bubble? Just feel like if I invest into something like this right now, its gonna bubble up and burst if there’s no actual usage.
Techemist: I think it’s quite dangerous and represents systemic risk. We are happy to extract yield from farming in our products but prefer to design products that can be protected against such risk.
You can look at farming as yield not volatility of underlying — if you can extract the yields while they are available while mitigating the exposure underneath, that would be a good product — this does mean you wouldn’t get the capital gain or capital loss though — but that’s the point.
Son of Ishtar: Things moved from 2017’s “buy my token to use my product” to “use my product, earn my token”. The growth of DeFi is driven by organic interest coming from people building and using financial instruments. Transparency and overcollaterisation help to reduce systemic risks. However, we always emphasise the importance of risk engagement, hence we partner with the likes of Nexus Mutual so give people hedging tools. The POC portfolio is our internal private fund designed to experiment with DeFi protocols. Products like TokenSets are 100% non-custodial.
Luffy: In your guys’ case, it sounds like you are holding the underlying? Also I guess yield farming is only as relevant as the token keeping the price up.
Son of Ishtar: Interestingly that with yield farming you can get hold of governance tokens that can be considered as common stock as they benefit from revenues generated by the protocol and can vote on how these revenues are distributed/retained. This means you can now start applying traditional valuation techniques as PE ratios.
Luffy: Do you guys do/publish any analysis on who is actually borrowing on these protocols?
Techemist: We publish very frequent and deep technical and fundamental analysis on various crypto assets via BraveNewCoin and we have produced research on a range of subjects over time but don’t have specific research on borrowing being worked on right now.
Theshade: Hi, long time observer and recent active participant in the crypto world. I’d always thought cryptocurrencies were exceptionally volatile and risky with no real application. If you look at successful investments / companies these usually have some utilitarian function whether it’s an equity firm or a toy manufacturer. What got me very excited about crypto is the realization that money in the form of Ethereum has become an actual utilitarian commodity with the ability to perform work or functions in society. DeFi makes it exceptionally easy/fluid now to obtain a low interest loan without extensive paperwork/fees/middlemen/comptrollers etc. You can imagine now we have a whole generation that’s grown up with computers and programming as part of their education. This next generation will devise applications we’ve not even dreamed of yet! It’s like the internet very early on. Was it risky? Yes. Did multiple bubbles form and burst and people got hacked and fortunes lost. Yes!! But look at how we’re communicating today!
Techemist: You’ve touched on themes I’ve been harping on for years and I couldn’t agree more with those points! This is the “digitization of value” and data is literally money. Programmable lego-money. We are currently seeing the beginnings of the greatest experimentation of monetary policy the world has ever seen
Estravan: Hey guys! Joined just for this AMA. Used BNC back in the day when I was a lot more active in trading. Didn’t realize there was a fund on the backend!
Techemist: Hey and thanks. I’m the founder of both. We leverage each other’s strengths to build products.
Estravan: Are your Sets open to people that don’t KYC?
Techemist:
Luffy: What do you guys think of the Aave credit delegation thing?
Son of Ishtar: I was super hyped about it! Felt like a super futuristic primitive that could drive the “fundamental value” you were referring to before. This will take DeFi to 10bil in 3 months I reckon. Incredibly neat and elegant solution for undercollaterised loans. The platform also moved the risk away from itself to the delegators — it’s very clever. Now we start talking about credit products, which means in longer run we will see personalised bonds, CDOs and all sorts of innovation. Increase in risk, increase in reward, hopefully hedging providers will keep up.
Luffy: Random question — what does ‘Son of Ishtar’ mean?
Son of Ishtar: I’m into ancient history, especially Babylon. Ishtar is the key persona in their culture.
Anthony: I had a question about your Holistic ETH Set (https://www.tokensets.com/set/tcapethdai) — I see that it trades based on on-chain indicators — what data platforms do you use to source that? BNC or something else?
Techemist: Abit of everything. BNC for the LX and a lot of taxonomy data, several external sources for on-chain data at this time.
mjc: You mentioned that you’re holding BAL in your fund… what’s your investment thesis for pure governance tokens?
Techemist: That internal fund holds BAL because the thesis of that vehicle is a bundle of assets that represent exposure to DeFi. BNC is currently developing a DeFi index that will be listed on a crypto exchange which you can long or short.
Inje: Do you have a sense of the sentiment from people outside of crypto atm from retail to institutions? Are they aware of the buzz that’s going on right now?
Techemist: The one’s we’re speaking to are very hungry. The #1 question is “how do we get exposure to these yields while minimizing risks”. 2nd question is “how liquid are we talking here”. It’s almost terrifying to be honest. Our counterparties have 100m to 1b + AuM and their tests are “low 10’s of millions to start with”. There’s a pretty substantial process we have to take these institutions through.
Son of Ishtar: Plenty of interest, a lot of eyebrows raised when we say things like “non-custodial, instant redemptions, 24/7 nav, continuous compound interest”. Also takes a lot of time to educate them. They get the value prop, but are unsure yet what risk management to apply, what valuation to use, how to form an investment thesis. This is a job for all of us in the DeFi community.
Anthony: You’re very fond of using the phrase “unstoppable financial automata” — can you break down what that means? Do you consider your Sets to be part of this category?
Techemist: TokenSets are an integral part of it! Remember the vortex? The term “Automata” is derived from the Greek word “αὐτόματα” which means “self-acting”. I prefer this term to DAO or similar. Its going to get very weird very soon. Financial Automata that buy their own server space or drones or whatever acting on their own for their pre-programmed interest. I think society is largely oblivious as to what is going to happen when crypto converges with other technologies.
Inje: Do you think that the value accrual in DeFi will also find itself in ETH? Seems like there’s less of a correlation there than people initially expected.
Techemist: Absolutely. It’s already happening. Look at the amount of ETH locked with DeFi compared to ICO’s in 2017. it took a few months for that to trickle into ETH. I’m mega bull on ETH over the next 9 months.
Theshade: Etehreum 2.0! Whats gonna happen! Are you and how are you gonna shift your current positions? What are the best and scariest things about the upgrade? Will we see major bubbles?
Techemist: The only thing I’m comfortable to forecast is that its going to be a drama like every other major event in crypto — I no longer think it’s going to require a rewrite of all smart contracts.
Inje: Where can people follow you for more information on new releases etc?
Techemist: Techemy Capital on Twitter here: @TechemyCapital
