Deputy CIO at Coinbase Asset Management on Costs of Crypto Yields Amid Geopolitical Volatility

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Marcel Kasumovich, Coinbase Asset Management’s Deputy CIO, recently discussed the intricacies of cryptocurrency investments amidst heightened geopolitical tensions and market instability. In a pensive LinkedIn article, Kasumovich raised concerns about the crypto market’s development and its capacity to embrace proactive investment tactics commonly utilized in more established markets.

Kasumovich started by recalling an experiment where six-year-olds, CEOs, MBAs, and lawyers built towers from similar materials. Surprisingly, the young children performed exceptionally well in this task. Drawing insights from this experience, he applied the same concept to investment strategies, emphasizing that swift action can be more beneficial than prolonged contemplation. This idea is particularly important when managing an active portfolio, specifically when it comes to risk management and improving the risk-reward balance using tactics like holding short-term income-generating assets.

Kasumovich highlighted how crypto asset technologies are increasingly influencing conventional finance. He mentioned the emergence of on-chain methods in money market funds and the shift of redemption processes onto cryptocurrency infrastructure through stablecoins backed by the U.S. dollar. This evolution, as he explained, mirrors the financial sector’s transition towards a more uninterrupted business model, similar to the round-the-clock availability of convenience stores.

Despite bringing attention to the unpredictability of crypto yield markets, Kasumovich pointed out their immature state. He elaborated that due to a lack of uniform industry practices and the complex movement of international funds, yields from similar crypto instruments can significantly differ based on the involved parties and an investor’s risk appetite.

In addition, he highlighted the significant distinctions in returns across the crypto marketplace. He emphasized that “different types of yields come with varying degrees of equality.” He went on to explain that the anticipated exchange rates of cryptos do not adhere to the standard interest rate correlation theory. Instead, these prices are subject to change based on market trends and the necessity for borrowing or lending within the crypto community.

greater returns often mean increased risk. Evaluating these risks, he pointed out, is a complex task that surpasses a sixth grader’s comprehension, indicating the importance of professional knowledge and caution when investing in cryptocurrencies.

Kasumovich’s LinkedIn post was essentially a summary of what he said in a five-page report (titled “Market Notes: Crypto Yields – What’s the Cost?”) he released earlier in the day.

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2024-04-15 04:07