Analyst of the Month
March 31, 2024

Kelly Ye: Analyst of the Month

Meet Kelly Ye: Portfolio Manager at Decentral Park Capital

Jon Ma
Co-Founder / CEO

Welcome to the 9th edition of the Analyst of the Month

Our mission at Artemis is to help shape crypto into a more fundamentals driven asset class by building out transparent onchain fundamentals with leading crypto analysts and protocols.

This month we highlight Kelly Ye, Portfolio Manager at Decentral Park Capital, a thematic, research-driven digital asset investment firm.

We're excited to share Kelly's story as she has a unique lens into fundamental investing from her time at Coindesk, Fidelity Digital Assets Management and ETF Development at New York Life Investments. We've really enjoyed reading Kelly's research via The Weekly and DPC thesis on Web3 Gaming.

Read on to learn more about her mission to democratize alternative investments, learnings from working at Fidelity & Coindesk, her thesis on Gaming Summer '24, and what do most fundamental investors get wrong.

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.
You’ve had quite the career ranging from Head of Research at Coindesk Indices to Head of Product at Fidelity Digital Assets Management to leading strategic allocation ETF development at New York Life Investments. 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.
Congratulations on your role as Portfolio Manager at Decentral Park Capital (DPC)! Can you share more what is Decentral Park and what is your firm’s investment thesis?
We are a thesis driven liquid venture fund that employs an in-depth research approach to identify digital assets with explosive growth potential, aiming to deliver venture-like returns.

Similar to venture investing, we closely monitor developments in the crypto industry to identify themes and technology breakthroughs that could lead to explosive growth opportunities. We refer to this as identifying 'DeFi Summer' before it arrives. Within each theme, we conduct in-depth research and engage with the project teams to identify the winners that stand to benefit most from the theme.

Unlike traditional venture investing, we primarily invest in liquid tokens. This strategy allows us to find better entry and exit points and stay attentive to the evolution of rising narratives, competitive landscapes, and macro environment.

Some of our current investment themes include the rise of Solana and its ecosystem, the wider adoption of Web3 gaming, and the renaissance of the Bitcoin ecosystem.
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.
Why is democratizing investing in crypto an important mission for you? 
I had the privilege during my 15-year career in traditional finance to develop products for both retail and sophisticated institutions. I witnessed how financial innovations such as ETFs could democratize access to investment products that were previously only available to the privileged, drastically reducing costs and improving transparency. However, there is still a long way to go, as many private investment opportunities remain inaccessible to everyone. I see blockchain as a tool to create an open and transparent financial system where investment opportunities are available to all. Crypto enables mainstream venture investing.

While I agree that crypto investing is risky and may not be suitable for everyone, thereby creating regulatory challenges, I believe that having these options available and making information transparent is a critical step in the democratization process.
You use relative valuation frameworks when looking at the $JUP valuation post airdrop relative to $JTO and $PYTH. How do you think about valuation frameworks for digital assets? 
We use a two-pronged approach to evaluate digital assets, heavily dependent on each project's unique use case. A project's growth potential can be broken down into its bottom-line growth and valuation multiples. Bottom-line growth relies on the Total Addressable Market (TAM) growth potential and the project's ability to capture market share. Valuation multiple growth is more challenging to estimate and depends on the competitive landscape and market cycle.

We employ various relative value metrics to assess a project. For a mature use case, we compare the project to its peers in the same ecosystem or similar projects on different chains to gain insights into valuation. For example, comparing $LINK's market cap to $ETH provides a benchmark for evaluating $PYTH relative to $SOL. For less established use cases, we may compare them with a Web2 equivalent business or use first principles to evaluate TAM and revenue opportunities.
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.
How do you overcome FOMO in a bull market?
Counterintuitively, making money is often harder in a bull market, as the FOMO leads many investors to chase shifting narratives, often resulting in buying high and selling low.

We strive to remain true to our investment process and continually evaluate our investment thesis, including our assumptions about growth potential and projects’ ability to deliver that growth. Price movements do not drive our investment decisions, but they are important factors informing us about market sentiment. We seek confirmation of our thesis based on fundamental data and sentiment, using price movements as opportunities to take profits or adjust allocations. Additionally, we adhere to a disciplined risk management process to ensure that our allocations to different risk and liquidity buckets remain within our guidelines.
How have you been able to use Artemis in your fundamental research? 
We are power users of Artemis and greatly appreciate its wide coverage of different ecosystems and excellent UI design. We use Artemis in several ways:
1. Tracking fundamental metrics for the projects we cover: The spreadsheet and dashboard functions allow us to create bespoke templates and receive real-time updates on projects and their competitive landscapes.
2. Bottom-up screening for high-growth opportunities: The Activities Monitor helps us stay informed about shifting narratives and highlights projects with high growth momentum.
3. Interacting with the investor community: Artemis has built a strong and engaging community of investors, and the team proactively interacts with the community to facilitate idea discussion.

Information is crucial in the crypto market due to its inefficiencies. We value tools that can enhance our workflow, help us discover emerging opportunities, and facilitate discussions with fellow investors. Artemis is definitely covering a lot of grounds for our needs.

You can find or reach out to Kelly on LinkedIn and learn more about Decentral Park Capital here. You can subscribe to the Kelly's The Weekly here.

Artemis Disclaimer: The authors, affiliates, or stakeholders of Artemis may hold interests in the tokens or protocols mentioned in this content. This disclosure highlights potential conflicts of interest and is not an endorsement to buy or invest in any specific token or protocol. The content is for educational and informational purposes only and should not be construed as investment advice in any form.

Readers should approach this information cautiously and consider their unique circumstances before making investment decisions. The views and opinions expressed are subject to change without notice, and Artemis bears no liability for any loss or damage arising from the use of this information.

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