Velvet.Capital blog

Attention HODL’ers- It’s Time to Diversify (A Little)

Attention HODL’ers- It’s Time to Diversify (A Little)

In the world of crypto, it’s not uncommon for investors to go all in on a single project or a few projects. The general nature can be a bit tribal and foster an us versus them mentality. The cult of personality is strong. This can be fun in the short term but it’s not prudent for long-term financial success.
Investing shouldn’t be an emotional game. It should actually be a practice completely devoid of emotion- just operating on the best possible information, removed from psychological biases, and with the understanding that no one can predict the future. BUT — if you must HODL — consider diversifying at least part of your portfolio into safer, more structured products so you don’t miss out on the crypto future.

A Lesson from TradFi with a DeFi Twist

Diversification isn’t your enemy. As a matter of fact, it can be a great friend. Institutions like Vanguard, Ark, BlackRock, Invesco, State Street, and Charles Schwab are some of the largest and most influential entities on the globe. They don’t just pick a few projects they like and hold. There’s an old saying in finance- the market can remain irrational longer than you can remain solvent. This nugget of wisdom basically points to the fact that no matter how great your investment thesis is, it doesn’t have to come true anytime soon. This can be a very painful reality (think Crypto Winter) unless you have access to extraordinary amounts of capital to wait things out.
They’ve created index funds for the top 500, 1000, 2000 companies in the world; funds for the top 100 technology companies; and funds for energy, treasury bonds, emerging markets, gold, and almost every sector imaginable. This is because the best long-term plan is to create broad baskets of investments that offer exposure across sectors — not betting on just a few companies. They have the luxury of holding these assets almost indefinitely if they so choose. Most people do not have this luxury but that doesn’t mean you can’t employ these principles to your advantage.
At Velvet.Capital, we’re here to help. We aren’t like those index funds or mutual funds your grandparents or parents invest in. The world of TradFi is controlled by massive corporations, gatekeepers, and bureaucracy. For most, investing in index funds is a smarter financial decision than evaluating and choosing companies but you need to give up custody of your assets to these institutions in exchange for their services (if you can even access them) — until now that is.

Best of Both Worlds w/ Velvet.Capital:

With Velvet.Capital’s chain agnostic DeFi asset management protocol, anyone can create structured financial products like pro- index funds, portfolios, and more! Our decentralized protocol will grow into the one-stop DeFi platform of the future. Your investments can grow and you never need to give up custody of your assets. Part of our secret sauce is we combine principles of tradfi like modern portfolio theory (think a diversified basket of investments that will allow you to get broad exposure to all the growth opportunities in the crypto space- not just a few) with the best of DeFi — like highly vetted yield farming (this can offer you additional yield).

1: Structured, Diversified Exposure

While over the past few years a few Bitcoin futures index funds have been created (ProShares Bitcoin Strategy ETF, GBTC) there really are not many true indexes of cryptocurrency. The closest to a true Cryptocurrency ETF is the Bitwise 10 Crypto index fund, but due to its weighting being based on market cap it’s almost entirely Bitcoin and Ethereum. The underlying structure is inefficient when compared to the alternative that investors choose to just buy Bitcoin or Ethereum outright. These funds end up costing investors approximately 5–10% a year in hidden fees.
A quote by Raoul Pal put it best:
“Issuing the BTC futures ETF is a good step but it’s basically handing hedge funds a massive arbitrage opportunity as the futures will trade at a large premium in bull phases and they get to capture those returns. This is the old financial market trick — you now have to add multiple new intermediaries who all make profits — the ETF provider, clearing house, futures broker, administrator, auditor, law firm, CME, and hedge fund arbs. Wall Street gets richer. Retail investors lose. Again.”
Also, the price action actually diverges greatly from the underlying assets they hold. Not to mention these solutions are heavily centralized- as Messari calls them: “State Sponsored Pieces of Shit” (not our words but if the shoe fits).
Velvet.Capital offers users the ability to have many different assets in decentralized crypto indexes or portfolios. It could include blue-chips (Bitcoin and Ethereum), mid-cap cryptocurrencies (Solana, Cardano, Binance, Polkadot), meme coins (Dogecoin, Shiba Inu), metaverse (Sandbox, Decentraland), yield farming, stablecoins, or tailored to a specific layer of the ecosystem.
By including many different types of cryptocurrency, Velvet.Capital offers its users the first true DeFi Index Fund.

2: Customization- You have real input in your investments!

You could try calling BlackRock on the phone and giving some feedback or asking for a specific product but we don’t recommend holding your breath for an answer. Index funds to this point have been created by large institutions where users can buy shares of whatever companies the institutions decide on, Velvet Capital is much different. Now anyone can easily create their own.
Create a portfolio with Velvet.Capital:
That’s right, we actually care about what you want. While many might enjoy the ease of investing in an index fund that people in the industry have created, others may want to invest differently. We respect that. While we do have funds we’ve created that you can invest in, we also allow for customization.

This means you (the investor) can decide which projects, and which weighting you determine the best. You can make a fund of all your favorite projects and weigh them based on your confidence they will succeed.
It doesn’t stop there, however — not only can this fund be used for you but others can also join in and use the community basket you have created. We will be running competitions and contests to reward users who create successful or highly used products. We’re committed to building with you.

Join Us in Building the DeFi Community of Tomorrow

To get started and get onboarded to our platform as we launch, go to our website and click “get early access”. Then share your email and you’re ready to rock’n’roll!
Plus you can join our discord and be a part of building the next big thing in DeFi.
This is asset management for the Digital Age. This is DeFi asset management done right. This is Velvet.Capital.