Autonomous Next has analyzed crypto funds and their respective strategies. We segmented funds by: (1) active vs. Passive styles and (2) bundled vs. Standalone products, for example a fund of funds bundles multiple funds into a single fund that tracks the cumulative performance of those funds
Autonomous NEXT has kept a running tally on the number of crypto funds within the space, as well as their respective estimated assets under management. Our findings indicate that over 300 funds currently exist, most of which started in 2017 and 2018, with a variety of strategies including Venture, Trading, Quant & Artificial Intelligence, Fund of Funds, Indexes, Token Baskets, Credit and Ecosystem Funds; with the majority (56%) of total AUM controlled by liquid venture funds. The inception of 61 funds in the first half of 2018 means barriers to entry such as market volatility and significant start-up costs do not pose as significant deterrents to new entrants seeking exposure into the crypto space.
Autonomous NEXT analyzed the price performance of the top 200 liquid coins over the last 1.5 years. The resultant graph looks like a Monte Carlo simulation, except the scale for outcomes is an unbelievable 10%-1,000,000%, graphed on a log scale. The black bar represents BTC and the magenta represents the BITA top 50 coin Index, which immediately highlight the correlation waves between BTC and the other crypto assets. Our findings conclude that such continued outperformance would suggest exponential software-like growth for digital assets, and that after an ICO offering, tokens may be listed on an exchange and experience the price performance of liquid coins.
Autonomous NEXT have modelled the cost breakdown relating to launching an ICO. The breakdown has identified 3 key areas of consideration: (1) Crypto law firm cost, (2) ICO platform cost, and (3) Liquidity.
Crypto law firm costs are split into two phases relating to the initialisation of the project and the items relating to the operation thereafter, both of which constitute around 20% of the overall launch costs. ICO platform costs relate to the construction and marketing costs of the ICO, including the payment for positive ratings, which accumulate to around 20% of overall launch costs. Liquidity relates to the launching of the ICO on a single crypto exchange which accumulate to a considerable 60% of overall launch costs.
Our findings were that the capital outlay needed to launch a crypto fund are considerably higher than originally thought, and as the space becomes more institutionalized so it’s likely to see these costs normalise.
Autonomous NEXT has broken down the emerging set of philosophical approaches to crypto valuation which has resulted in various feedback loops.
Our findings show that the lack of concrete definitions behind tokens and coins coupled with the retro-fitting of existing economic frameworks and math from adjacent industries results in finding a commonly used valuation framework close to impossible. The need for a valuation framework is driven by (1) institutional investors used to DCF and comps entering a market that is more appropriate for early stage venture, and (2) the immaturity of decentralized project models, which have no stable equilibrium around long-term instrument pricing and market outcomes. Market manipulation and persistent speculation has skewed activity statistics related to digital assets and hence made real vs. created activity difficult to distinguish. The transition from corporations to networks and from profits to mutualized resources is also a meaningful unknown.
Autonomous Research has quantified the rising regulatory and technological pressure in global capital markets. Since 2010, we have found a gradually decreasing revenue pool across (1) FICC, (2) Equities and (3) IBD. The CAGR across these divisions stands at -3.4% for the period between 2010-2016. However, The FICC division experienced a significant decline with a CAGR of -5.5%. This is attributed to increased regulation and the associated deleveraging of the ecosystem combined with increasing technological forces.