The Map Is Not the Territory: Rethinking Crypto as an Asset Class

The drivers of bitcoin's returns are very different from those of the other markets, and it is therefore rightly seen as an attractive asset class by investors.

Let's first try and understand what it means to talk about 'crypto as an asset class' in the first place.

"An asset class is a group of securities that exhibits similar characteristics, behaves similarly in the marketplace and is subject to the same laws and regulations."

The "Crypto market" today is made up of crypto assets that have fundamentally different characteristics.

Unlike common stocks that have pretty well-defined economics, this isn't the case for crypto assets.

During speculative bubbles, like the one we saw in late 2013 and again in 2017, all crypto assets tend to move together with strong correlation.

If a luxury resort does a security token offering, the returns on that are going to be much more correlated with the luxury resort market, or the real estate asset class than bitcoin.

As the industry progresses, there are sure to be many more types of crypto assets, each with its own crypto-economic design and return characteristics.

Investors would do well to ask themselves the fundamental thesis on which they are buying a crypto asset.

"Diversification needs to be done more intelligently than buying a bunch of crypto assets and crossing your fingers - investors need a"Map" with finer detail to navigate the "territory.