From Wall Street to Crypto Alley - 1st Anniversary Reflections

From Wall Street to Crypto Alley - 1st Anniversary Reflections
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January 19, 2023

The new year is often used as a time of reflection. As we think back about 2022, there’s no doubt last  year came with its fair share of highs and lows for crypto, which is, if you take a long enough view, to be expected. Despite the hype and the endless media cycles, the fact remains that the industry, as an asset class, remains in its infancy.

As we kick off 2023 at Hivemind, it’s worth reminding ourselves and our stakeholders that this truth prevails. Even at its most volatile - platform implosions like,  FTX and asset repricing during crypto “winter,” Hivemind retains its confidence in the overall digital asset ecosystem. Here, it’s worth repeating a central tenet of our investment strategy:  Hivemind’s success isn’t contingent on the appreciation of any given cryptocurrency or set of tokens, or the performance of any particular crypto platform. We and our stakeholders will succeed simply because the digital asset ecosystem gets larger, ever more integrated into business, transactions and investing, and so more ubiquitous.  Our vision for a protocol-based economy is practical and reflective of both the benefits of web3 and also inevitable activity already underway.

Consistent with this view, we’ve continued to strengthen our platform, expand our resources and deepen our capacity to generate value across an ever wider range of digital assets. Below we take the opportunity to journey back with us through year one as a company, and take a peek at what may lie ahead.

Timing is as Good as Ever

In launching a crypto fund right at the end of 2021, with hindsight, it’s clear that we set ourselves up for tests of our  resilience, our team, and our basic investment thesis. Ironically, these tests had - and so far have - little to do with intrinsic performance (although of course that’s front of our minds), and everything to do with a challenging mix of only partially-informed public opinion, regulatory uncertainty, inevitable bad actors and equally inevitable re-valuations.

Said another way, depending on what you read or who you talk to, early 2022 superficially looks like a poor time to launch a multi-strategy investment platform focused on crypto. A year later, we’re certain it was actually a historically good time to enter the markets.

In fact,  accelerating at the pace we have achieved over the past twelve months may not even have been possible in a bull market for crypto. The re-valuation of the entire digital asset sector so far has created more legitimate opportunities, sooner, across our multi-strategy platform than may have been the case in peak markets. Recall that at Hivemind, we focus on five key verticals - market infrastructure, programmable money (DeFi), Web3, Metaverse & Gaming, and blockchain protocols - to evaluate the long-term impact of potential investments.  While we are still building out our operations, the fact is that we’ve been seeing an enormous amount of potential growth in each vertical.

Volatility is an Asset

One insight we’ve always had that seems to be playing out is that there’s value in recalling the early days of the Internet. As is true today for digital assets, there was enormous potential for the early web.

There also was enormous skepticism. And of course massive de- and re-valuation periods, some of which involved near or even outright illegal behavior, and all of which contributed to shifts in regulation. Maybe the one big difference was that for whatever reason, few people called the early Internet a “fad” that would disappear over time; other than the occasional highly accoladed economist. Regardless, the learning from the past year is that in emerging opportunities, volatility isn’t per se a negative. It’s actually inevitable in these situations. The more edge case a technology, the more volatility it will have as an investment. From our perspective, volatility is just the sum of divergent opinions - and the more polarized those opinions are, the more volatility there will be. Blockchain technology remains at an incredibly early stage of development - and so it drives widely divergent opinions, which in turn create swings in perceived and actual value.

The key consideration however is not those swings, which as we note are inevitable for this stage of the technology. Instead, it’s whether or not visionary, creative and dedicated people are continuing to come into the space and continuing to experiment with an ever-wider array of applications of this tech. From our position as a multi-strategy investor, the “winter” over the past year has in no way slowed down either the pace or the range of application development. To us, at this stage, this reality validates the reason to build an institutional grade platform in this space.

An Enduring Company with Talents

In terms of establishing such a platform, another key insight supported by our experience over the past twelve months is just how different “tradfi” and DeFi” are. In our minds, there is zero question that going forward, to capture and create the most opportunity in digital assets, it will never be enough to just be expert in finance. You also have to be - legitimately - a technology company, where proven engineering talent is not just a support function, but actually at the frontier of investment sourcing, due diligence and of course R&D. While hedge funds in particular have long leveraged scientific and mathematical expertise to give themselves a technological edge with regard to trading, that expertise fundamentally was applied to improving performance within a financial framework that’s nearly a century old.

What Hivemind is building is a reimagined financial framework where assets, returns, and business models are inseparable from tech - and where technological skill itself can define opportunities and returns. This is not an investment world for which traditional finance is well-equipped. It is, however, a world that advantages Hivemind, which has the opportunity to design and build an organization from scratch that better integrates the best of engineering, technological and financial talent. A key point here is that unlike many in the space, we believe in mature governance, accounting, regulation and process. All those tradfi functions are essential to credible finance. But we also have begun translating such functions into a tech-first platform that looks as much at code and analytics as dollars and cents, with both sets of considerations done natively.    

From a team perspective, we’re lucky enough to be able to discover and recruit an amazing range of talent to execute against this new model. It’s been immensely exciting and fulfilling working with the founding team to scale our plans out, and we are constantly on the look out for others to join us who are passionate about re-architecturing how finance and technology evolve and co-exist.

Building Trust for the Long Term

In the coming years, we hope to offer a range of individual and distinctive digital asset products to suit the needs of our investors, including open-ended and close-ended funds with varying levels of return. We strive to make our products simple, elegant, and backed by the best people and fund structure. A key part of this is avoiding unnecessary complexity and providing investors with the basic building blocks they need to navigate this space effectively. We believe this approach and the insights we’ve discussed above, as well as others, will help us build performance as well as the credibility that goes with it for the long term. Institutional capital needs a bridge into the future - and Hivemind aims to be just such a bridge.

We are grateful for the opportunity to shape the industry as it continues to evolve. In the years ahead, we believe there will be an increasing need for reliable sources of information and guidance to help this sector thrive. Thank you to everyone who believed in, supported in and invested with us in 2022. We look forward to what’s to come!