You’ve Been at the Forefront of Creating Digital Asset Products from an Early Stage. Why Do You Think Investors Should Consider Putting Money into Digital Assets?

You’ve been at the forefront of creating digital asset products from an early stage. Why do you think investors should consider putting money into digital assets?

The digital asset class has come a long way since its inception, with new technologies and use cases emerging constantly. As we navigate the volatile landscape of crypto, we had the pleasure of interviewing Mark Caltieri, managing director, product and strategy at CoinDesk Indices, to gain valuable insights into this evolving domain.

With years of experience in the financial markets, Caltieri brings a unique perspective to the realm of digital assets. Having witnessed the evolution of the industry firsthand, he offers a seasoned view on the best ways to approach investing in this space.

In a recent interview with CoinDesk, Caltieri highlighted the quantitative diversity of return offered by digital assets. Comparing the risk to reward ratio, he noted that the performance of bitcoin is more than three times that of the S&P 500 for every increment of risk.

“If you're going to invest money, one of the best risk-reward ratios is, without question, in digital assets as a stand-alone asset class,” said Caltieri.

Moreover, he emphasized the transparency of public blockchains, which can be audited in real time, rendering them trustless. He also pointed out the economies of scale and capital efficiencies that blockchain technology enables.

“This technology makes things easier, cheaper, better and faster,” explained Caltieri.

The interview covered several key topics, including the biggest obstacles preventing people from investing in digital assets and the best ways to get alpha in today’s volatile markets.

Here are some highlights from the interview:

What are the biggest obstacles preventing people from investing in digital assets?

I think the first is recency bias. We saw in 2022 the failure of FTX, Celsius and others, which was a mix of counterparty failure, fraud and crimes. No one would fault anybody for being hesitant to get into digital assets because of that, but I will point out that the second-most fined company ever in the history of mankind is JP Morgan. So while you can forgive people for recency bias, I would argue they're not appraising it properly against TradFi counterparty risk.

Then, whatever people’s recency bias is anchoring them to, the tendency is to follow up with confirmation bias, "I don't want to touch that asset, since memecoins are down 90%.” So I believe these two biases combined do to not motivate people to underwrite the space properly.

The biggest issue is that no one is pivoting their thinking to realize that all TradFi assets are held in “street name,” meaning you don't own it — your brokerage firm does. People also aren't aware that banks’ reserve ratios are in single digit percentages all over the world, meaning if you have money in a bank, it's actually not there. There’s a lack of appreciation of the fractional reserve banking system, which arguably has caused all of the credit crises throughout history.

But if you put aside headlines of bad actors and failed memecoins, look at the infrastructure and what it offers. We have shared security or privacy with zero-knowledge proofs. You can participate in certain networks to make them stronger, which then offers you staking yield. If you provide liquidity, you can get an automated market maker (AMM) yield. The system is efficient and strong.

What are the best ways to get alpha in today’s volatile markets?

First, have an accumulation strategy. This means you pick a portfolio of your best 5, 10, or 20 assets and dollar cost average them.

Second, develop a trading plan. For example, if Ethereum drops to $1,200, then what am I doing? Or if Ethereum goes to $4,000, what will I do?

Third, you want to “invest with the trend,” which I see as a three-factored process. First, we're looking at the