Now that we know what the first ETP will look like (Brave New Coin), I wanted to give my thoughts on why I think it’s a good idea to invest in this ETP. Although I do have a fairly large number of tokens (growing about 3000 daily, thanks to farming), I will try to be unbiased in my assessment of the potential here.
Two of the biggest reasons why I think the concept of ETPs (similar and arguably superior to ETFs) are generally valuable have to do with simplicity and diversification. For instance: most people with even a small investment/financial background would likely recommend investing in the SPY (S&P 500) ETF. It is the largest ETF on the stock market with more than $360B AUM (Assets Under Management) and has performed very well over the course of it’s 25+ year history. The average annual return since it’s inception is just under 10% (9.96%). These stable returns attract many people due to it’s low-maintenance and it’s diversification in 500 companies. The risk is relatively very low and allows many people to put their hard-earned money towards something with consistent growth. For many, this is even their retirement fund.
I would argue that this same value can be applied to the ETPs as many people start to look towards the Crypto space as the future or as a way to grow their wealth. As of this post, there are more than 10,000 Cryptocurrencies (according to CoinMarketCap). I would imagine that many people are confused on which ones to invest in, especially considering a lot of the tokens are extremely technical in nature so understanding their use case is difficult. In addition, the barrier to entry is often quite high, especially if someone wants to invest in a token that is not currently offered by one of the larger Centralized Exchanges (CEX) such as Coinbase. The reasons for this difficulty and high barrier of entry include:
- Understanding what a wallet is
- How to transfer crypto to a wallet
- How to swap tokens on a DEX (especially on the BSC network, since it requires the more difficult to obtain BNB tokens)
Enter the WSB ETPs. They will reduce at least some of the steps above by allowing you to purchase Stablecoin (available on most/all Centralized Exchanges) and invest that Stablecoin directly to an ETP. Additionally, depending on the selected ETP (and future growth of the WSB Dapp with more ETP options) you will be able to easily diversify in not just Crypto, but also in Stocks, Futures, Gold, etc. all in one place. The performance of these ETPs will have to speak for themselves over time, but I believe they may be a way to have consistent low-risk growth in a diversified, simplified way.
DISCLAIMER: Past performance does not equal future performance. In-fact, for some of the analysis I’m about to post below I would even go so far as to say it is a little bit misleading. You should NOT expect to achieve 30% growth year over year. The information I’m sharing below is simply a look at how much Crypto has gone up over the past 6 months. I personally believe there is a lot of room for the space to grow based on fundamentals, use case, etc., but while the potential is high, so is the volatility. I’m happy to lay out my case for something I believe in, but by all means PLEASE do your own research when investing your money into something.
Now for the fun stuff. Since we now know what tokens will be part of the first ETP and what their allocations are, I decided to pull some data from CoinMarketCap and get an idea of what we’re looking at. A few things to remember as you look at this data:
- Bitcoin is “King.” In other words, it generally controls the Cryptocurrency market. If Bitcoin goes up by a lot, so do most other coins. If Bitcoin is affected by some bad news (as we’ve seen recently), so do many other coins. I’m hoping recent trends mean that this is over and other cryptos will stand on their own a bit more, but we’ll have to wait and see how it all plays out.
- Due to time constraints, the data I pulled only went back to January 1st 2021. This means that the explosive growth of DeFi over the last few months makes up a large part of the chart (and, by extension, is shown in the representation of the ETP token selections).
- Ethereum has done REALLY well. While this is nice to see, nobody should expect to put $10,000 towards just one token and hope to see it outperform a diversification across multiple tokens. Choosing the right token takes a lot of time and experience to do the research, understand market trends, demand, potential, etc. This has been one of my biggest arguments for the ETPs all along.
- Even though other tokens (such as ENJ, DOGE, etc.) have seen even higher gains (sometimes in the order of 1000x-10,000x), there was no way to predict this and there are many other cases where the token performed poorly and went to 0 or was rug-pulled. I find it best to put my money towards something I’ve researched thoroughly (or trust, as is the case with the SPY and other ETFs) and avoid the speculative high-risk, high-reward gamble that many tokens end up being.
Something I wanted to see is how the ETP would have performed (at current selections/allocations) over the course of the past 5 months against other cryptos (and the SPY ETF) if you would have invested $10,000 into each:
What you see here is that $10,000 would have been turned into $32,690.84 which is about 227% increase and is crazy. I don’t think we really saw this growth of DeFi coming, so even if we had a WSB ETP at the time it’s not very likely the selections would have been similar to what they were with this ETP. I think there’s a good chance we would have been able to capture some of it though, with proper crypto selection, good research, and again, diversification. I see value here…
I know I said something about this above, but I just want to say that the SPY index shown above is probably a bit misleading. The fact is, it is one of the best investments to get into if you’re looking for consistent growth. Don’t let the “lack of growth” in the chart above fool you - it did very well over the last 5 months and grew about 14%.
Something I haven’t mentioned here is that the other valuable part of the WSBDapp is in it’s ability to take in community feedback and make changes along the way. We can decide to change weighting, remove/add crypto, etc. etc. I think this will allow for more manageable growth and reduce the ability for someone to panic buy/sell if something grows/crashes.
The point I am trying to make is that there is more value in investing in a single Crypto ETP for diversification’s sake, if you believe there is value in Cryptocurrencies as a whole. Not that the growth seen above is something to expect. Although, if we even get 1/5 the performance of what we’ve seen above, I would be extremely happy with it. As for me and this ETP that is about to be released, I will be an investor and I hope others see the potential and invest as well.