Book Review: Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond

Cryptoassets_CoverI pre-ordered this book on Amazon after seeing it mentioned on Josh Brown’s blog, The Reformed Broker. I was intrigued because it purported to be a rigorous treatment of cryptocurrency and cryptoassets written from the perspective of a relatively sophisticated investor.

Burniske and Tatar state their goal was to produce a book that is the equivalent of Benjamin Graham’s Intelligent Investor for cryptoassets. That is kind of like Dennis Rodman saying he wanted to do for rebounds what Michael Jordan did for dunks. To the authors’ credit I think they have done an admirable job of approaching a fast-evolving space in a balanced and rigorous way.

Summary

The book is well-organized. It is segmented into three parts: What, Why and How.

What: Discusses the theoretical underpinnings of cryptoassets and provides background information on the history and evolution of several major cryptocurrencies: Bitcoin, Ethereum, Ripple, Monero, Zcash and Dash (I may have omitted a couple). Burniske and Tatar take pains to distinguish between cryptocurrencies, cryptocommodities and cryptotokens.

Why: This section provides an overview of Modern Portfolio Theory (MPT) and the use of mean-variance optimization in constructing an investment portfolio. The authors argue for the inclusion of cryptoassets in an investor portfolio based on their potential to improve overall portfolio efficiency, similar to more “traditional” alternative investments such as hedge funds, private real estate and commodities. I skipped most of this section as I am very familiar with MPT.

How: This section was really what attracted me to the book as it lays out a framework for performing due diligence on a prospective cryptocurrency investment. The authors address issues of custody, valuation and trading, as well as some of the nuances of trading in fragmented markets with the potential for wide fluctuations in trading volumes. The valuation model they float for cryptoassets is more or less the Equation of Exchange (MV = PY or in this case P = MV/Y). One issue I don’t think they adequately address is the issue of reflexivity in the “velocity” of crypto transactions (speculative trading activity drives up network activity which in my view creates a kind of feedback loop).

Who Should Read This Book

Anyone looking for a comprehensive introduction to cryptoassets would benefit from reading this book. It would be particularly useful financial advisors looking to educate themselves in order to address client questions or advisors considering cryptoassets for inclusion in client portfolios. The book is very much written in the language of the financial professional.

Who Should Not Read This Book

This book does not contain any secret sauce for getting rich quick. People who are looking for “hot tips” or “hacks” will be disappointed. While the authors are clearly bullish on the long-terms prospects for cryptoassets, they emphasize the need for investors to educate themselves, conduct thorough due diligence and develop an investment discipline. The due diligence concepts outlined in the book are applicable to any asset class or investment opportunity.

My comments on this book should in no way be taken as a recommendation to buy or sell any cryptoasset. If you are wondering whether you should own cryptoassets as part of your investment portfolio you should consult with a financial advisor who can advise you based on your unique financial circumstances.

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