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In a new interview with Barron’s and Grayscale, Breanne Madigan notes the rising number of institutional investors entering the crypto markets and says anyone looking to invest in the space should consider use cases and utility.
Madigan highlights BTC’s potential growth as a store of value that competes with gold and says XRP’s high transfer speed and low cost gives it a trillion-dollar use case in the global payments market.
“So for people who are newer coming in, take a look at a few individual crypto assets. Understand their utility, their core value proposition, what problem are they solving. Look at the total addressable market there.
For example, in payments because of trapped capital, there’s trillions and trillions of dollars of market opportunity that XRP as a digital asset is solving for. So that’s a huge addressable market. So there you would see a driver for value creation.
For Bitcoin, look at the market cap of gold and look at the market cap of Bitcoin. There’s still tons of room, but will there be volatility between here and when we see a top for Bitcoin? Absolutely. So my general view is we’re still in the super early stages of this market. While it’s very promising to see huge institutional investors and large Fortune 500 companies coming in and putting their treasury cash into Bitcoin and other crypto assets, this is all promising, but there will be short-term volatility in individual coins.”
When it comes to portfolio allocations, Madigan says she recommends investors utilize a barbell strategy, which is typically defined as a portfolio that consists of 50% short-term instruments and 50% long-term holdings.
“I would say a barbell strategy for those who can be patient, which many investors want and look to long-term value creation, put a portion of your allocation in equity taking stakes in some of the most promising companies in the space and look at their seven and ten-year returns if you can invest in that type of timeline horizon. Then take the other portion of your allocation and pick three or five or whatever is the right number and diversify and pick a few crypto assets that you really see a story behind, that you understand the value proposition and understand the problem you are solving.
Because ultimately as you figure out that addressable market, you can back into reasonable valuation. And as I said in my example earlier, taking just a 3% exposure to the asset class should result in at least a 15% outperformance versus a traditionally managed portfolio [that’s] non-crypto.”