June 2022

The Exclusive Interview with
Demelza Hays

Who is Demelza Hays?
I am the Director of Research at Cointelegraph, which is the largest crypto media company in the world with over 17 million views per month. As the Director of Research at Cointelegraph, I am constantly learning about new innovations in the blockchain and digital asset sphere. Over the last eight years, I have authored over 20 analytical reports on digital assets. In addition to writing, I have managed two regulated cryptocurrency funds and I have recently joined the Zeltner & Co team as the portfolio manager of a cryptocurrency actively managed certificate.

How did you end up in the world of crypto currencies?
In 2021, I completed my Ph.D. in Business Economics at the University of Liechtenstein. Inspired by my work in wealth management at Incrementum AG, my dissertation explored the role of cryptocurrency within a diversified portfolio. Formerly, I was a Forbes 30 Under 30 and U.S. Department of State Fulbright Scholar. I was also the first person to install a Bitcoin ATM in Liechtenstein. I installed one right in Städtle in a giftshop called “Hoi” in downtown Vaduz in 2016. I am originally from Florida, and I made my first couple hundred thousand dollars buying houses in Tampa for $30,000 apiece in 2009 after the real estate crash. Later, I worked for the US Department of State in Punjab for two years, then I moved to France where I did my Master’s in Economics at the Toulouse School of Economics, and then I started my Ph.D. in Business Economics at the University of Liechtenstein. My doctoral supervisor, Professor Dr. Andrei Kirilenko is currently at Cambridge University, and he is the former Chief Economist of one of the regulatory agencies in the US called the Commodities Futures Trading Commission. I have been publishing papers and researching crypto-currencies since 2013. I have also been invited to speak at the Federal Reserve in Cleveland, Ohio and for the Bundestag in Germany, and for the European Commission in Brussels, amongst other honors. I first heard about Bitcoin while I was researching microfinance in India in 2012 under the auspices of the U.S. Department of State Fulbright research scholarship. I started my first crypto business in 2014, where I arbitraged Bitcoin between exchanges and localbitcoins.com cash trades. Due to the high return, I decided to pursue opening Bitcoin automated teller machines (ATMs). After attending the Gottfried von Haberler Conference organized by Prince Michael of Liechtenstein, I sent an email to the financial regulators in Liechtenstein, and I asked them if I could meet with them to discuss my business idea. I met with them in February of 2015, and my partner and I were the first people to present Bitcoin and crypto to them in person. They accepted our proposal for a Bitcoin ATM, and we got to work on founding a business. I co-founded an Anstalt in Liechtenstein called the “Blockchain Büro” with a local named Philipp Büchel. Over the years, we did many projects together, but some of our highlights included building a distributed ledger points system for green carpooling for the Amt für Umwelt in Liechtenstein, and we helped advise the Liechtenstein government on the Blockchain Law that they enacted. At the same time, the University of Liechtenstein asked me to develop a class on the topic of cryptocurrencies in 2016. I began teaching it in 2017, and I taught the course for three years until graduated in 2021. I also taught other courses at the University like corporate finance and principles of finance. In 2017, I joined Incrementum AG as a fund manager, which is a licensed wealth management firm that has 6 funds and over $100 million in assets under management. I helped them launch one of the first alternative investment funds (AIFs) that holds physical cryptocurrency. We had our assets with Bank Frick, and we bought our crypto via Bitcoin Suisse. The fund invests in physical gold and cryptocurrencies, and it is still live today. A few years later, I moved on from Incrementum and joined the Dash Investment Fund, which was blockchain venture capital fund based in the Cayman Islands. As the fund manager, my major wins included helping them secure investments in CoinRoutes (smart order routing software) and Valkyrie (company that launched the first Bitcoin futures ETF in US). In 2020, I joined Cointelegraph as their Director of Research, and this is still my current role. I manage a great team of 18 researchers, and we publish education reports for professional investors on blockchain topics such as non fungible tokens, games built on the blockchain, metaverse, Web3, amongst others. All of Cointelegraph’s reports can be found at research.cointelegraph.com.

How do crypto currencies work?
Unlike traditional currencies such as the Swiss franc, Bitcoin is neither issued by a central bank nor backed by a government. Instead, Bitcoin is based on a blockchain, which is a distributed digital ledger. Blockchain is a linked body of data made up of units called blocks containing information about each transaction, such as the buyer and seller, time and date, total value and a unique identification code for each exchange. Entries are connected in chronological sequence, forming a digital chain of blocks. When a block is uploaded to the blockchain, it becomes available to anyone looking at it, thereby acting as a public record for cryptocurrency transactions. The blockchain is decentralized, meaning a single entity does not control it. The digital chain of blocks is similar to a Google Doc that anyone can edit. It is not owned by anyone, but anyone with a link can contribute to it. As different individuals make changes to it, your copy is updated as well. While the idea of everyone being able to edit the blockchain may appear unsafe, it is precisely what makes Bitcoin trustworthy and secure. To be included in the Bitcoin blockchain, a transaction block must be validated by the majority of Bitcoin miners. The unique codes used to identify users’ wallet sand transactions must follow the correct encryption pattern. Since these unique codes are long random numbers, counterfeiting them is extremely difficult. The statistical randomness of the blockchain verification codes required for each transaction dramatically minimizes the likelihood of a fraudulent Bitcoin transaction being made by anyone connected to the network.

How do you select a specific coin in such a big universe?
To find new coins to invest in, I study what the large blockchain venture capitalists are buying. For example, I watch the portfolios of Chris Dixon at a16z and Polychain Capital. I also monitor the number of mentions of specific coins on crypto media outlets and Twitter sentiment. When I am interested in a project, I reach out to the team and get to know them better on a web conference. I also talk to teams in person at conferences. Once I have found a project I like, I look at what projects those team members have been involved in in the past. Except for Bitcoin, I avoid projects that have anonymous founders. I try to focus on coins that have over $1 billion in market capitalization that have been on the market for at least one year, and that are tradable on multiple exchanges within multiple geographic jurisdictions.

What´s currently happening in the crypto markets?
Bitcoin & Co. have provided investors with a higher return than any other asset class over the last decade. Bitcoin’s supply is reduced by 50% every four years, meaning that more demands results in higher prices. This has led to a +200% ROI per year on average return historically. Historically, a 2.5% allocation to Bitcoin to a Global 60/40stock and bond portfolio led to a +41% Increase in Sharpe Ratio. Bitcoin & Co. have had an unprecedented low correlation with traditional asset classes enabling investors to increase portfolio return without increasing the standard deviation. Rebalancing works best with assets exhibiting low correlation and high intra-volatility. Currently, the cryptocurrency market is responding to the Fed’s rate hikes. If the dollar appreciates, cryptocurrencies go down in value. Therefore, it’s important to be able to do market neutral strategies including risk reversals and cash and carries, amongst others.

What are the plans for the Crypto Currency Frontier AMC you are setting up with Zeltner & Co?
The Cryptocurrency Frontier certificate is the first traditional investment vehicle that offers the combination of digital asset exposure and staking rewards. The investment strategy produces multiple streams of yield income in a bespoke solution created to outperform non-staking focused financial vehicles. The core investment focuses on Bitcoin while the satellite investments focus on alternative digital assets. The satellite digital assets earn compounding staked rewards for helping to secure various blockchain networks. The staking rewards are reinvested in Bitcoin, thereby, increasing the portfolio’s Bitcoin holdings over time. In addition to earning staking rewards, the strategy executes an actively managed rebalancing formula ruleset that has been exclusively designed to harvest cryptocurrency volatility while reducing risk in order to provide long-term sustainable gains. Our investment universe is determined on the basis of potential returns, risk appetite, regulations and logistical considerations and can therefore increase and decrease. All cryptocurrencies are securely stored offline in cold storage with Bitcoin Suisse. Composed of the largest income-generating crypto-assets, the Cryptocurrency Frontier certificate tracks the staking rewards being generated from modern Proof-of-Stake technology and auto-invests the rewards into a long-term Bitcoin position. A dynamic rebalancing is triggered once the core Bitcoin share surpasses 50% of the portfolio. The target satellite share is 20% - 50% with a cash share of 0% - 40%.