Kenneth Hearn

Fund Manager

Looking back at the Dotcom market, it becomes clear that early price performance stems from speculation and expectations, as opposed to the usability and utility of the technology. At the height of 2001’s Dotcom market, no one understood the scope of use-cases and transformative properties that the internet offered; speculators bought in on fickle and fleeting hype.

Blockchain, the underlying technology

Similarly, the majority of the global population does not yet understand the benefits of blockchain technology. In addition to blockchain’s often cited use-cases: global value transfer, digitization of assets, deflationary monetary systems, and decentralized decision processing, this streamlining tech will provide innovations in areas we have yet to imagine. If we can ignore the early price performance for a moment, we can acknowledge that the technology’s potential remains the same. So how should investors capitalize on the future of crypto assets, while managing the considerable risk?

Again, we look towards the analogous Dotcom bubble. If, at the bottom of the bubble’s development, an investor had invested in the top 50 Dotcom assets, weighting each asset equally in the portfolio at 2%, and assuming 80% of those holdings went to zero, that investor would hold the following 10 stocks: Yahoo, Ebay, Amazon, Adobe, Priceline, Oracle, ASML, Intuit, Apple and Sandisk. The portfolio would have realised a 16-year CAGR (Compound Annual Growth Rate) of 18.2% per annum. This performance does not take into account rebalancing towards new market entrants such as Google and more recently Facebook, Twitter and etcetera.