The Digital Assets Newsletter: Week 2
- ateekberg
- Jan 19, 2022
- 4 min read
Hope you enjoyed the new ‘weekly market peek’ dashboard. We soon will insert an in depth overview of what all the indicators mean and how to read them on our website.
Quote of the Week
"The real trick in highly reliable systems is somehow to achieve simultaneous centralization and decentralization."
- Karl E. Weick
Too Long Didn't Read Summary:
A Brief Introduction to Crypto Assets:
We begin this week with the start of a series of articles in our newsletter in which we introduce and explain digital assets in a more thorough, straightforward manner. With this, we begin by answering the questions we all have when we first start our educational journey into this space such as 'what is a blockchain,' explain how one should view these assets given their generally misleading name and much more. Read more below!
Investor Joe Update
Find out what Investor Joe has decided to do this week and why below!
We are not advocators we are educators
A Quick Market Update
The Micro-view: We’ve seen another red week in the markets with a 3 month low on BTC around $39,7K. The recent sideways market seems now to show a trend downwards. That said, we are seeing some bullish indicators such as an ATH leverage ratio, indicating traders are more non-risk averse than ever before and eager to capitalize, read more HERE. Perhaps this could indicate an upcoming final bull run rally? Only the future will know for sure.
Macro View:
The floodgates of institutional investments (VC, angel investors, Hedge funds etc) into the crypto space see little sign of slowing down from 2021, which was by far the largest year yet. These investments will lead to more innovation opportunities, and positive long term price action for successful and competitive projects. Read more from the Binance Custody department HERE.
A Brief Introduction to Crypto Assets
The most common misconception within the Web3/crypto space is that all crypto assets = currencies. This misconception is understandable since the media keeps referring to “cryptocurrencies” and mostly writes about Bitcoin and other “coins”. But let’s take a step back and look at how space has evolved. What is a blockchain? Blockchain can be thought of as the internet, but with a built in accounting system that enables secure payments and keeps track of all ownership. On top of this “internet”, it is then possible to build companies that use the novel features of this accounting tool. Bitcoin, why and how? Currently when making transactions online, we have to trust a bank (centralized third party). What Bitcoin managed to create, is a peer-to-peer (person-to-person) digital currency that works without having to trust a centralized third party. This is possible thanks to the novel features of a blockchain. Next, Ethereum. In 2014 a new blockchain called Ethereum launched. While Bitcoin is a hugely valuable invention and widely adopted ($1 trillion market capitalization), it has limitations. Bitcoin only makes it possible to send and receive Bitcoin. Ethereum however, makes it possible to build projects on top of the blockchain. These projects, i.e. Decentralized Applications aka dApps, are built using smart contracts (the code/logic). Let’s try to understand a fairly simple dApp. Aave If it’s possible to keep track of ownership and have secure payments, why not build a bank. Imagine a global bank, where people can deposit their money, take out loans and the interest paid by the borrower is split between the depositors and the bank. Voilà, that’s the business model for Aave, a lending dApp built on top of the Ethereum blockchain.
Today, Aave has hundreds of thousands of users and around $8B in borrowing volume (ie. loans outstanding). As seen in the chart below, on the 11th of January, Aave received around $900k in interest payments. Of this $900k Aave takes an approx. 10% cut that goes to the protocol treasury which is managed by the token holders and the rest goes to the supply-side (lenders).
The token holders own and govern the protocol. This sounds quite similar to shareholders in a traditional company, right? Hence tokens in protocols shouldn’t be thought of as a speculative currency, but rather as shares in a company built on top of a blockchain.
Summary:
The key takeaway from this brief introduction to digital assets is that not all crypto assets are random speculative “shitcoins” with no real use case. Blockchain technology makes it possible to create new kinds of digital companies with real services and actual cash flows. These dApps can be valued in a similar manner as traditional companies by looking at their founders, users, brand and financial metrics.
/Sebastian Motelay & Robin Borgström
Here are our sources if you are interested in reading more:
Investor Joe Portfolio Updates
Previous positions remain unchanged (view HERE). This week Joe continues his DCA strategy with 100$ split into:
⚠️ DISCLAIMER ⚠️ This is not financial advice, and is purely for educational purposes only, always DYOR!
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Written by: Erik Gunnarsson Questions? Reach me at
DISCLOSURE: SOME DIGITAL ASSETS SOCIETY MEMBERS ARE INVESTED IN CERTAIN TOKENS AND COINS WHICH MAY HAVE BEEN SPOKEN ABOUT ABOVE. THESE STATEMENTS ARE INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY COIN OR TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.
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