An introduction to Blockforce Capital

 

By: Eric Ervin

Seven years ago I took a big chance leaving the comfort and stability of a great role at Morgan Stanley to create Reality Shares. I did so because I believed we could create more innovative offerings at a faster pace when shielded from the restrictions of a large firm. I’m incredibly proud of the results our team achieved in a relatively short time. Our ETFs, built on proprietary methodologies, have grown to over $300M AUM in just a few years. And in the past year, we launched the first blockchain ecosystem ETF, the first China-focused blockchain ETF, and were awarded “Most Innovative Index Provider” at the 2017 Fund Action ETF Innovation Awards.

Just like that big step I took seven years ago, Reality Shares takes a giant step forward today as it becomes Blockforce Capital.

Blockforce Capital is built on three core beliefs:

  1. Blockchain technology will redefine global markets, and will continue to grow in market capitalization and percentage of global transactions for many years to come.

  2. The unique investment potential of digital currencies can best be unlocked through a blend of traditional and non-traditional methods.

  3. Though we define ourselves as a tech-forward asset management company, people always have been and will continue to be our most valuable asset. Our team and our customers will be the driving ‘force’ behind the Blockforce brand.

Let’s look at each of these beliefs in more detail.

Blockchain technology will redefine financial markets worldwide.

We truly look at this statement as an inevitability. Back in 1999, Milton Friedman was prescient when he stated, “…the Internet is going to be one of the major forces for reducing the role of government. The one thing that’s missing, that will soon be developed, is a reliable e-cash.” With blockchain technology, digital currencies become that reliable e-cash. Already, digital payments (including e-commerce) account for over $900 billion of annual financial activity in the U.S. according to Statista.com. Consumers are becoming increasingly comfortable with making purchases and moving money online or via their mobile devices. With digital currencies built on blockchain technology, over time, these transactions become infinitely more secure, cheaper, faster, and eventually, easier. Simply put, there is no reason that digital currency transactions will not continue to grow and eventually become the dominant form of global money movement. Taking that trend one step further, blockchain technology allows for the ‘internet of value,’ the next logical step in the evolution of asset ownership and transfers between individuals, institutions and machines. Transferring and storing value in a digital format may not sound revolutionary, but doing it on a decentralized, peer to peer network without any reliance on intermediaries will literally change the world as we know it today. Just as the Internet created businesses and ecosystems we couldn’t fathom at the time, blockchain technology will likely serve as the next innovation platform for countless other life changing benefits. Note that this does not necessarily mean that the price of Bitcoin will go “to the moon,” volatility will disappear, and banks will cease to exist. Just as the transition from gold to fiat took many decades and had many twists and turns, so too will the shift toward digital asset ubiquity. Of course, investors will need to be mindful of the market risks and exposures, laws and regulations, and their own risk tolerance. But this emerging, potentially dominant, asset class just cannot be ignored by the sage investor for too long. As investors, we are always looking for outcomes with an asymmetric payoff, where the reward potential is much greater than the risk. Depending on your point of view, this asset class, could be just that. Of course, in its infancy, we must assume that the negative payoff is a complete loss of capital, so size your investments appropriately.

Unlocking the unique investment potential of digital assets requires a blend of traditional and non-traditional methods.

This asset class is young, unique and no one knows exactly how it will evolve or how long it will take to mature. Growth of cryptocurrency assets are dependent on so many unique factors, both quantitative and qualitative. Some of these may be evolutionary, like the introduction of ETFs and SEC regulation of digital currency exchanges. Some may be more radical changes, like the introduction of a digital currency as fiat replacement by central banks. In the traditional world of finance, we see asset managers fighting it out for scraps of value or “alpha” for their investors. In that world, seeking alpha becomes a zero sum game, where gain for one means loss for another. However, blockchain represents a value creation event, not just a value capture event. In fact, we believe the largest alpha, will be on the creation side of the equation. To be sure, there will be a plethora of “alpha donors” as there are with any inefficient asset class. However, we see significant wealth going to those early adopters, who build the ecosystem, the infrastructure and the “onramps” for the next wave of adoption.

Due to their nascency, digital currencies, as an asset class, have a multitude of inefficiencies, and value creation may take several years to materialize. In order to develop accurate predictive modeling of digital asset markets, it’s important to utilize multi-dimensional data analysis that captures the nuances of digital currency creation and expansion. At Blockforce, we think this is not unlike identifying unique patterns in space-time that provide clues to our universe’s origin, evolution, and future. Our team of theoretical astrophysicists have years of experience studying the most extreme of space-times on the world’s largest supercomputers. They will work closely with our traditional equity and derivative market analysts to add unprecedented intelligence and predictivity across the spectrum of digital currencies.

People — our team and customers — will be the driving ‘force’ behind Blockforce.

It’s easy, when you’re building a forward-thinking brand that tracks an emerging digital world, to emphasize the importance of numbers and technology. After all, it’s mathematics and technology that enable the existence of digital currency, and in the last few years we’ve all read how robo-advisors or bots are able to make rapid investment decisions that no set of human brains can match. But to focus solely on numbers and technology would be a critical mistake. As we build the team at Blockforce, it’s essential to bring together individuals who can collaborate, share insight and knowledge, and humanize our quantitative approach. Our company culture focuses on mutual support and team growth. And we believe our customers must be part of that team emphasis and brand journey. That is why we will invest heavily in customer education and transparency. You will see regular articles and videos by the Blockforce team to showcase our insights, and to create a transparent and trusted brand our customers will value.

Just like my journey seven years ago, this will not be easy. There will be obstacles, and no one can precisely predict the path and speed of digital currency evolution. But we are collectively steadfast in our belief of the potential of blockchain technology to revolutionize every aspect of the world in which we live. We are excited for the journey that lies ahead for Blockforce. And we hope you will join us on this exciting trip. Buckle up!

 
Kevin Yedid-Botton