What's the consensus • letter 149
Who is your daddy and what does he do? It’s Colton here, a newly minted father and the CEO of Hedgehog, the app that helps you buy baskets of cryptocurrency and automate your digital asset exposure wherever you custody funds. Don’t forget that also now includes a self-custody MPC wallet where Hedgehog can invest on-chain on your behalf without knowing your private key! Watch the short demo, because we now support native assets on Optimism, Base, and Arbitrum!
Sorry I’ve been MIA, but we had the annual CoinDesk Consensus conference two weeks ago and my wife had a complicated delivery for our newborn baby boy last week. Don’t worry, everyone’s healthy and happy, and it all turned out alright in the end. Superbly, really.
Eating other people’s lunches
Consensus was an interesting event, as you could feel the anticipation in the air from all sorts of traditional finance folks who are just starting to dip their toes into crypto and web3, but there’s still a lot of hesitation around deploying capital into anything but the biggest and most well-known products hosted by the oldest and most trusted names. If I had to sum it up with one observation, it’s that Blackrock co-sponsored a financial adviser and registered investment adviser day, but they didn’t even bother to send any representatives to the event!
We saw all kinds of advisers from big name firms talking about how excited they were about crypto, but they would confide in hushed tones that their firm policies did not allow them to be the ones to broach the subject of digital assets with clients, and they had to wait for clients to bring questions about the asset class to them. Some service providers were lamenting that capital had flowed out of their more complex products into the Bitcoin ETFs, and that it was hard to interest advisers in more sophisticated strategies in the space. The current regulatory regime is clearly having a chilling effect on long-tail token adoption.
It’s a dog-eat-dog world out there, especially when it comes to finance, and it can be a handicap convincing strangers to trust you with their money when you don’t have a track record measured in centuries, or even decades. It’s pretty common to hear the same questions as financial professionals try to figure out how it fits into their existing practice:
- Do my clients really need exposure to crypto in their portfolios?
- If you’re under the age of 65 and you have spare capital to include risk-on assets in your portfolio, I think you’d be crazy not to have at least a small allocation, especially if you believe in market cap weighting.
- Will the returns be worth the additional overhead?
- Past results aren’t a guarantee of future returns, but Hedgehog’s live track record at 12 months has shown that it’s possible net of fees, at least in the short term. We’ve done everything we can to make our app plug and play.
- Will it convince my clients to allocate more AUM?
- If your clients are already dollar cost averaging, it’s unlikely that crypto will magically increase their income, but you will certainly be able to convince clients that aren’t getting help from their existing advisers to transfer their holdings for your more sophisticated and complete asset exposure.
Overall, the state of play is painfully manual for a business sector rooted in software, and our hope was that automating it would be a big win for all involved. But it seems like being high touch is a feature for all the customers who haven’t made the leap yet. What do you think? High touch or high automation? How often is the right interval for checking in?
It looks like Zerion and Zapper are adding tokens to their smart contract chaining services. If Hedgehog went open source and issued a token to coordinate new token additions and user-defined strategies, would you be interested in contributing?
Keep hedging,
— Colton