Willow Crypto: An Introduction + Open Q&A Video Summary (April 2021):
- Back in the early 90s, when the internet first started, there were big names in investments who were saying that the internet wasn’t going to impact our lives that much. Alexandra was able to experience the revolution that the internet build-out provided us and now, we can all see the net effects. We liken the experience of what Alexandra had back then to the groundswell that we think is just beginning with digital assets. We already see the impact of the potential of what this can do. More and more institutions are adopting crypto and putting their money towards building infrastructure on digital assets. The stock market was created well over 100 years ago now, and crypto could possibly be the next iteration of markets in some ways. The investment thesis for us, more than anything else, is to get into the infrastructure, this is going to change the face of business much like the internet did. We’re currently in the phase of institutional adoption where you’re starting to see major, international companies dedicating internal resources to figuring out how to use this technology and integrate it into their business. These early players can see that there is a lot of potential for cost savings, efficiencies, speed and security, as well as possible collateral. It’s still conceptually being built out, but we think the potential is pretty significant.
- A study on the potential impact of blockchain technology done by McKinsey shows significant promise. In agriculture, they’re expecting a medium impact on revenue and a significant impact in reducing costs. The impact on the social, financial services, automotive and healthcare industries is also projected to be similar. What gets us really excited about stepping into this industry is that this technology has the potential to unlock all sorts of social, cost, and revenue impacts across the board.
- A ledger is a record that keeps track of something, a digital ledger or distributed ledger is an entire network of computers that is distributed all around the world. The major difference is that on a single entity backed ledger, you must place your trust in that one entity, as opposed to a distributed ledger where you don’t need to trust one individual, it’s the entire network. The entire network is agreeing that the data on it is in fact correct. Cryptocurrencies are the tokens that work on these distributed ledgers to move value back and forth or to move representation of property or digital or real-life assets that are converted into a token, that is then put on a blockchain so you can trade these tokens via these marketplaces. What really makes this fascinating is that in addition to just sending an accounting unit back and forth, you can also have different contacts, and code on top of that, which means the possibilities are truly endless. What this all ultimately means is that you can do something a thousand times faster or more efficiently, which then allows us to try out new things and create entirely new innovations.
- When you look at the market capitalization of the entire cryptocurrency space, it is almost two trillion dollars, which in comparison is roughly the size of Apple, with around 55% being Bitcoin. The remaining amount of market capital is in about 9,000 different cryptocurrencies, many of which are not promising, but there are a good handful of these that are extremely disruptive, companies that are tackling some really important problems and coming up with very interesting and innovative solutions, and that’s where we really see the case for investment come up.
- Back in 1997, there were about 120 million internet users, there are about 130 million Bitcoin users as of January this year. It’s a very similar point as to where we are in terms of adoption for digital assets compared to the internet build-out. What this tells us about current trends and how this is projected out of the next several years is that the number of users may roughly be 10 times what it is today or it will increase exponentially as other types of technology have also gained adoption in a very similar fashion. (For more info look up S Curves or Adoption Curves)
- There are three core tenants that we try to stick to that have really worked out of us. Firstly, Mindshare, which means that we invest where the developers and builders are actually building and a community is forming. The second, agnostic infrastructure, where we invest in projects that solve challenges such as scaling, interoperability, and security, who are actively making the cryptocurrency space more resilient, robust, and useful. Finally, useful use-cases, we invest in projects bringing new efficiencies to market, solving real-world problems, disintermediating legacy systems, and creating a fairer, more connected and just world. The cryptocurrencies that fit these characteristics are where we ultimately end up investing to create a diversified digital asset portfolio.
- We are offering a separately managed account that invests specifically in digital assets, the Willow Crypto SMA. We’ve partnered with Gemini Trust Company as our custodian, and Blockchange as our asset management platform. From a security standpoint we feel very comfortable using Gemini because they are under the same exact regulation and reporting rules as our current custodian. All cash, is FDIC insured up to $250,000 and Gemini has what they call “digital asset insurance” that protects from a potential hack. If you are a current client of Willow, we will set you up with an account at Gemini and link it to your brokerage account with us at Pershing so you can wire funds directly in and then have it deployed to our digital asset strategy.
- As a new asset class, there are different risks out there that might not be present in the financial worlds, but also many of the same risks that are also present in the financial world. The biggest concern that we see is regulatory risk, where we have not had much guidance from the SEC or regulating bodies on how they want us to treat digital assets. There is also volatility risk, and liquidity risk. We do not want people to put a significant portion of their net worth into these spaces. We’re currently having our employees open accounts with Gemini to get exposure to the digital asset space. If you have a long-term time horizon and you can stomach the volatility, then it’s our opinion that it’s definitely worth having some of your assets exposed to this space.
Questions from Q&A
- “What is the minimum investment for Willow Crypto?”
- “How will you be identifying the promising Bitcoins that belong to those 10 areas: banking, healthcare, energy, supply chain, real estate, etc. These seem to be areas for diversification, is that correct?”
- “Why is Bitcoin a risk?” “How is Bitcoin in and of itself different from a risk standpoint compared to the Willow Crypto SMA?”
- “What is the availability of digital assets?”
- “Can you address the following problems: A utility problem, low barrier to entry, fraud/theft, no regulation, all bubbles eventually burst, blockchain is years from being mainstream?”
- “What are the tax benefits of crypto and how does that play into crypto management in the SMA?”
If you are interested in the Willow Crypto SMA, please click here or give us a call.
The Willow Team
+1 413 236 2980
0:00 – Intro
0:06 – Introductions
3:08 – Investment Thesis
8:31 – Value at Stake
10:16 – What is a ledger and how do cryptocurrencies tie into this?
24:42 – Use cases
26:06 – The Cryptocurrency World
28:24 – Adoption of Cryptocurrency
30:20 – Investment Strategy
32:30 – Willow Crypto SMA
36:56 – Risks
41:41 – Q&A
41:46 – “What is the minimum investment for Willow Crypto?”
43:18 – “How will you be identifying the promising Bitcoins that belong to those 10 areas: banking, healthcare, energy, supply chain, real estate, etc. These seem to be areas for diversification, is that correct?”
45:25 – “Why is Bitcoin a risk?” “How is Bitcoin in and of itself different from a risk standpoint compared to the Willow Crypto SMA?”
47:30 – “What is the availability of digital assets?”
51:06 – “Can you address the following problems: A utility problem, low barrier to entry, fraud/theft, no regulation, all bubbles eventually burst, blockchain is years from being mainstream?”
57:29 – “What are the tax benefits of crypto and how does that play into crypto management in the SMA?”