Fumbi Index Portfolio Thesis
Published: 25. 08. 2020 ·
We believe in the transforming power and high growth potential of cryptocurrencies. As cryptocurrencies are still at the nascent phase, investing in them is difficult for most of the people. Therefore, we designed the Fumbi Index Portfolio as the easiest way for anyone to invest in the Cryptocurrency market.
The Index tracks the market capitalization of cryptocurrencies and is rebalanced daily through our algorithm. Our portfolio is carefully selected and reflects our investment thesis that identifies three major value drivers/ use cases within the cryptocurrency space:
The Internet had for long lacked the native payment transfer protocols that would facilitate the global exchange of value. Cryptocurrencies have been created to address exactly this issue. While Bitcoin has been by far the most dominant player in this area, several alternative cryptocurrencies emerged in the past years that aim to compete for the market share within the payments industry.
Cryptocurrencies offer multiple benefits over traditional payments. They are faster, cheaper, more transparent, and allow to eliminate the middlemen. Moreover, they offer censorship-resistant payments that are unheard of in the legacy payment systems. Therefore, we believe that payments are one of the top use cases and value drivers for the cryptocurrency market.
Asset examples: Bitcoin, Litecoin, Stellar, Dash, etc.
Blockchain and distributed ledger technology (DLT) enable far more than payments, though. Smart contract platforms such as Ethereum set the ground for the creation of decentralized applications that may be implemented in the vast amount of industries ranging from finance, insurance, gaming to logistics, and many more. Smart contracts allow to automate processes, and thus increase efficiency, save costs, reduce risks, and enforce compliance by default.
These benefits represent the main reasons why we believe smart contracts will be increasingly more implemented in the future. Even though Ethereum has been the most popular platform of choice for smart contracts, it has been facing fierce competition from a couple of projects that have emerged in the last years. These platforms, along with the apps built on top of them represent not only a completely new asset class but also an evolutionary step in the development of the Internet and therefore go under the name Web 3.0.
Asset examples: Ethereum, EOS, Cardano, Tezos etc.
Decentralized Finance (DeFi)
Decentralized, or open, finance has been the most growing segment in the cryptocurrency space. DeFi creates a universe of smart contracts that mimic functions of the legacy financial institutions and bring them to blockchain in the form of open-source decentralized applications. This results in an open parallel financial system that is absolutely transparent and permissionless. Unlike the traditional financial system, DeFi apps are governed by math and thus treat everyone equally, regardless of their race, status, or geographical location.
These features make cryptocurrencies and DeFi apps a great gateway to the global financial markets for the 2 billion unbanked people in the world. In the past two years, the DeFi ecosystem consisting of various decentralized exchanges, lending protocols, and derivatives have grown hundreds of percent not only in respect of the number of applications and users but also the market capitalization.
Asset Examples: Maker, Aave, Compound, Synthetix, 0x etc.
Based on our investment thesis we screen the market and make changes into our portfolio on a quarterly basis. We carefully select cryptocurrencies based on the following formal criteria:
- Every coin needs to be in the Top 50, based on market capitalization according to CoinMarketCap.
- Every coin in the portfolio must be tradeable on one of the major exchanges.
- All the cryptocurrencies in the portfolio need to have sufficient liquidity -- the minimum average daily trading volume of 5M USD globally.