Decentral Park Capital

Meet the March '24 Analyst of the Month: @_Kelly_Ye_ ✨ Kelly is Portfolio Manager at @DPCio and previously was at @CoinDesk @DigitalAssets. Read on to learn more about: 1. Her journey from Fidelity, Coindesk to Decentral Park 2. Her mission to democratize alternative investments 3. The Gaming Summer '24 Thesis What is your story? What was your journey into investing and into crypto? I have a background in quantitative finance and have always enjoyed tackling complex problems in finance. I've worked on building models for fixed income investing and developing investment strategies that mimic hedge fund returns. Before entering crypto, I led research and product development for New York Life Investment's ETF platform. We were creating “liquid alternative ETFs” that aimed to deliver hedge fund-like returns but in an ETF format. During the bull market in 2017-2019, outperforming the S&P 500 with traditional market instruments was challenging. Also, high-return strategies like Private Equity and Venture Capital were not easily accessible to retail investors and lacked daily liquidity. I was seeking an investment with high returns, low correlation to the stock market, and daily liquidity. That's when Bitcoin caught my attention. After diving into the white paper, I realized that blockchain technology and the new trust model it created would significantly change our future. I explored creating investment products around Bitcoin and tokenizing private funds using blockchain at New York Life. However, due to the conservative nature of traditional financial institutions, I decided to shift to full-time work in crypto in 2020 at CoinDesk Indices. How did your time at the different places shape your framework when investing in crypto? I’m grateful for my unique, non-linear career path, which has allowed me to gain expertise in various asset classes and roles. I've consistently been at the forefront of financial innovation, intimately understanding its benefits and pitfalls. My career is dedicated to harnessing the power of innovation, bridging the divide between early adoption and widespread acceptance, and delivering its value to investors. My background in research and quantitative analysis enables me to quickly develop models for understanding new asset classes. Experience in product development at both startups and large institutions helps me evaluate projects’ product-market fit and growth strategies. Years of investing across different assets give me a holistic view of portfolio construction to maximize growth potential while taking disciplined risk. I take pride in my work at CoinDesk, where I laid the groundwork for crypto investing by establishing credible pricing data and a taxonomy for digital assets. I also gained valuable insights while assisting Fidelity in building its digital asset investing business, understanding the opportunities and challenges faced by TradFi institutions in adopting crypto assets. What do you think most fundamental investors get wrong about crypto? The crypto market is highly inefficient, which means there is no one-size-fits-all model or metric for fundamental analysis. Context is crucial for everything. When analyzing blockchains, we typically look at user and transaction-based metrics to assess activity and adoption. For DeFi projects, we focus more on trading volume or Total Value Locked (TVL). Adding to the complexity, many fundamental metrics can be manipulated as projects use various incentives to boost activity. We must look beyond the numbers to identify growth drivers and assess their sustainability. For example, Derivative DEXes have been a popular investment theme due to the small market share of Perpetual DEXes compared to CEXes relative to their spot peers. The Perpetual DEX space is highly competitive, with multiple projects vying for market share. Due to incentives, some projects may rapidly gain market share only to lose it once the incentives end. Lastly, narratives can sometimes precede fundamentals, especially in a bull market. A partnership announcement or a product roadmap update can have a significant price impact without any meaningful change in fundamentals, as the market's perception of future growth changes. Investors should closely monitor project updates and narrative shifts to detect such changes before they are reflected in fundamental data. You talk about “Gaming Summer” as a DPC thesis for 2024 – can you share more why now and what you think will drive more Web3 Gamers? Blockchain technology enables ownership of in-game assets and aligns gamers' interests with developers, leading to high expectations for Web3 gaming as a transformative force in the gaming landscape. However, the Play-to-Earn (P2E) games in 2020 failed to sustain hype, as financial incentives alone were unable to attract mainstream gamers. Despite this, the Web3 gaming space has attracted significant investments from VCs thanks to the initial hype. Simultaneously, we are witnessing a transition in blockchain technology from a dial-up to a broadband moment, with major breakthroughs improving blockchain performance. We anticipate that 2024 will be the year when past investments and technological advancements will begin to yield results, as game development cycles typically take 2-3 years. Furthermore, we are seeing an increasing number of Web2 studios embracing Web3 games. Similar to how traditional financial institutions have adopted DeFi in various aspects of their business, including the successful launch of spot BTC ETFs, we expect the gaming industry to undergo a pivotal moment where multiple popular Web3 games could emerge, attracting fans from both the Web2 and Web3 communities. Gaming investments require patience and expertise. Our research team includes gamers who not only understand investment models but can also evaluate the design aspects of games to identify the 'fun factor.' We invest in both horizontal gaming platforms and individual games. For gaming platforms, we assess their ability to attract quality games. Metrics such as the number of games on their platforms, daily active users (DAU) statistics, and the trading volume and price action of in-game assets are all monitored to evaluate their performance. When evaluating individual games, we focus on the 'fun factor'—whether the game design has unique features to attract players to spend time and money. We also monitor player and NFT trading statistics to gauge the game's ongoing popularity.  Through our extensive gaming portfolio, we have formed close relationships with gaming platforms and strategic investors to gain insights into the continued evolution of the Web3 gaming landscape. Read the full interview: artemis.xyz/research/kelly-y…