Faith does not interfere with rational investment! Adjusting investment portfolios, Tezos Foundation avoids tens of millions of dollars in losses

According to the semi-annual report released by the Tezos Foundation, the foundation restructured its asset allocation in January this year, adopting a more conservative investment strategy compared to its previous investment portfolio. This adjustment saved the foundation from losing tens of millions of dollars in the black swan event in mid-March.

Tezos Foundation Adjusts Asset Allocation

According to the biannual report released by the Tezos Foundation, the foundation held approximately $635 million in total assets as of January 31, 2020, a decrease of $17 million compared to the same period last year, with most of the funds being used to support ecosystem development.

However, it is worth noting that the foundation has considerable flexibility in asset allocation. According to research by Messari analyst Wilson Withiam, the foundation withdrew part of its cryptocurrency investments last year, liquidating about 7,500 bitcoins and increasing more conservative investments.

The following images show the investment portfolios for 2017, 2019, and 2020, respectively.

The investment portfolio after the 2017 token sale shows that 63% of its assets were in Bitcoin, with the rest in Ether. Two years later, the foundation nearly liquidated all its Ether holdings, and the Bitcoin position also decreased to 61%, but the total asset value increased by 175%. In the biannual report released this year, the Bitcoin position further decreased to 47%. Stablecoins and fiat holdings accounted for 24%, while another 23% were in the platform's own token XTZ, with other cryptocurrencies like Ether making up only 6% of the investment portfolio.

Regarding why Tezos chose to liquidate its Bitcoin reserves instead of using cash directly as operational funds, Withiam pointed out that Tezos may have had other intentions:

"The foundation may have chosen to sell Bitcoin and increase investments in XTZ, which has risen by 40% since August last year. Additionally, the foundation has also increased its XTZ holdings by 10.6 million through staking."

Why did Tezos dip into its Bitcoin reserves to fund development as opposed to cash?

It’s possible the foundation chose to offset its increased exposure to $XTZ, which came from an appreciation in price (up 40% since Aug.) and an extra 10.6M tokens collected via baking rewards

— Wilson Withiam (@WilsonWithiam) March 31, 2020

Potential Savings of Millions of Dollars in Losses

The Tezos Foundation's conservative investment portfolio has seen significant results in the past month, with the restructured portfolio only decreasing by 21% during last month's black swan sell-off, reducing the total asset value from $635 million to around $500 million, saving millions of dollars in losses compared to the previous portfolio.

Projects that can timely adjust asset allocation to ensure sufficient operational funds are the ones that can maintain long-term stability. Many projects failed because they did not adjust their portfolios in time when the crypto market turned bearish in 2018, depleting operational funds and eventually ending in failure.

Related Reading

• Tezos Dynamics: Abnormal Increase in Supply, Foundation's Bitcoin Holdings Approach 50% of Total Assets
• Outperforming EOS, Tezos (XTZ) Officially Becomes the Largest Staking Project by Market Cap

Join Telegram now for the most comprehensive fintech information, blockchain insights, and industry examples!