The Owlbserver : distilled insights on Index competitors - 2022.03.11 Friday

Dear owls,

Following our discussion with @DocHabanero there have been a few changes to the Owlbserver over the last 2 weeks :

  • First of and de facto, we are now targeting bi-weekly posts to leave more time for in-depth research & analysis. We’re mindful that this may result in significantly longer posts.
  • Second, we’re not going to focus exclusively on the decentralized asset management sector anymore, but will also collect as much intel from the TradFi sector as possible.
  • Third, the work on a custom database to compare AUM between DeFi index protocols has been paused until we extract the most actionable insights possible from this publication.

As always, your feedback means a lot and is greatly appreciated ! :heart:

Without fiddling around any further, let’s dive into the last 2 weeks lowdown …


TradFi insights

→ Ryan Rasmussen from Bitwise recently communicated on Twitter the results of an interesting poll that followed a DeFi presentation he did to 400 Investment Advisors : while more than 60% seem to be already involved in crypto, the poll says less than 50% have heard of DeFi and less than 20% have already used a DeFi application.

→ This comment likely comes on the back of Bitwise 2022 Benchmark Survey of RIA’s attitude towards crypto, which interestingly reveals that while 94% of advisors received questions about crypto in 2021, around 60% of them cited regulatory uncertainty and volatility as the main barriers to greater portfolio allocations.

→ In a significant ramp-up of their communication around their filling to convert $GBTC into a Bitcoin spot ETF, Grayscale have created a specific landing page to encourage public comments on their application, as per the SEC’s latest ruling on the matter.

Grayscale’s main arguments to convince investors of the benefits from the GBTC conversion into a spot ETF is the reduction of fees and the elimination of premium / discounts.

Investors comments ( a lot of !) can be consulted here. Here are some of the most recurrent arguments developed in favor of a BTC spot ETF :

  • Avoidance of self-custody or security risks posed by traditional crypto wallets / exchanges.
  • Regulatory tax compliance issues.
  • Matter of national security and strategic interest.
  • Innovation in financial technology.
  • Fair pricing, avoidance of NAV decay.
  • Allowance of exposure via retirement account.
  • Avoidance of costs incurred by rolling future contracts.

Grayscale (again !) have produced an interesting report promoting what they call the Postmodern Portfolio Crypto Allocation - uuuhm this Post-Modern stuff strangely reminds me something :joy:.


  • Compared to Internet user adoption trend, we’re still in a “1999-like” growth phase.
  • Crypto market cap is already big enough to justify inclusion in institutional portfolios, but still has huge upside potential in the coming 5 to 25 years.
  • The past and projected risk-adjusted returns of crypto assets make them a key component of an inflation-beating, diversified portfolio in the current macro-environment.

DeFi news

Domani DAO have passed the proposal to launch an Avalanche Blue Chip Index. The product is capitalization weighted, with a broad exposure to the wider AVAX ecosystem (proposed composition notably less restrictive than Cook Finance’s equivalent product).

Indexed Finance have also launched a new product in the form of an alternative Layer 1 index comprising native $SOL, $LUNA, $AVAX, $ONE & $FTM tokens bridged over to Polygon.

Scalara (DeFi Pulse) 's NFT index $NFTI is live on Polygon and Arbitrum since March 1st. While the aggregated market cap at the time of writing sits around 855k$ (555k$ on Polygon & 300k$ on Arbitrum), there are in total 24 holding addresses for the product.

→ The Galleon DAO / Beverage Finance partnership has launched $ETHMAXY, the Ethereum Max Yield Index providing 3x leveraged exposition to staked Ethereum with $DLB and $DRINK rewards on top of the staking yield. TVL has just increased over 500k$ at the time of writing.

Parting thoughts

One thing that stood out when I started comparing the DeFi and TradFi approach around investors communication is the focus that our off-chain competitors put on macro-environment and societal developments, while the DeFi sector is still strongly focused on highly technical details. Food for thoughts !


I like the focus on both defi and tradfi. Some feedback – hopefully constructive:

  • Differentiation. It would be great to highlight the attributes that differentiate these products from our current and upcoming products, for example, in terms of liquidity, fees, tracking error, composition, risks, etc. This would help both our marketing and product development efforts. For example, ETHMAXY has a 1.95% streaming fee, $275k trading depth at 1% slippage, and a certain deleveraging mechanism. NFTI has what tracking error and minting slippage considering that the underlyings have zero dex liquidity.
  • Components. Report on new components or protocols that could potentially be productized if they align with our strategy, for example, if there was a new protocol for fractionalized virtual real estate that could make a virtual REIT possible. This could also include new assets being listed on lending markets, eg, stETH on Aave.
  • Structured products. I know you’re aware of this but to reaffirm that the scope includes any product that can be constructed as a set and not just conventional indices.

I hope that’s useful.


I think this insight is important, and speaks to the readiness of defi to actively court retail users. Sure, tradfi retail equity ownership is only 27% of the US stock market (remaining is institutional) but I suspect retail adoption will only to put more pressure on institutional investors -

*94% of advisors received questions about crypto in 2021,

good stuff. thanks.

1 Like

Thanks @JosephKnecht, sure, very useful.