DeFi Technologies Inc. (DEFI) Earnings Call Transcript & Summary

Good morning. I'm Gregory McNiff, Investor Relations for DeFi Technologies. Welcome to DeFi Technologies' webinar focused on the DeFi technologies Valour Investment Opportunity Index. I'll be moderating this event, and this event will be recorded. Before we begin, I'd like to cover a few housekeeping items. Today's event is being recorded and will be posted to DeFi Technologies' website following the event. I would also like to call your attention to our safe harbor statement and remind you that today's discussion may contain forward-looking statements, which are subject to the risks and uncertainties outlined in our filings in particular, on Forms 10-K and 10-Q, and actual results may differ from those forward-looking statements. All statements are made as of today, and the company is under no obligation to update these statements. Additionally, we will not be discussing DeFi Technologies' financial performance or guidance. After the formal remarks, we will open the event to questions. [Operator Instructions] With that, I would like to turn it over to Andrew Forson, President of DeFi Technologies and Chief Growth Officer at Valour, who will be joined by Andrea Disaro, Structured Products and Quantitative Analysis Principal. Andrew?

Thank you very much, Greg. Thanks, Andrea. It's a pleasure to be here. Thank you all for joining. We're very excited to be able to introduce the DEFT Valour Investment Opportunity Index. I think the idea behind this is we want to show that we can have a strong narrative for driving value into our ETPs and highlighting certain unique qualities that sometimes get lost in the discussion of DeFi Technologies and Valour. For instance, for many of you on the call today, it may come as a surprise that DeFi Technologies has the broadest portfolio of digital asset underlying exchange-traded products in the world today. The second thing that may come for a surprise -- come as a surprise to many of you is that we have a unique advantage in the fact that we host so many of these digital asset underlying instruments within our ETPs. For many of you, if you come from a background of dealing with Web3 or coding Web3 applications or investing in Web3 or blockchain tokens, you'll understand that there's a distinct difference if you are investing via an exchange-traded product or if you are investing via a platform, a centralized exchange or otherwise. And if you wouldn't mind, Greg, next slide. What happens with this distinct difference in the digital asset space is there are quite a few problems that arise. One of the key problems is how do you actually get an analysis or signal from the cryptocurrency market to determine what it is -- might be an opportunity to invest in. Unfortunately, today, we're in a situation where when Bitcoin sneezes, the entire digital asset space catches a cold. However, as we're going to show, there are actually a number of digital assets that, in some ways, are negatively correlated with Bitcoin and even in a down market, continue to have very, very high returns. So what we find is that the key problems are that the digital asset space tends to be price driven and backwards looking. The other thing is the ability to actually invest at a market price that you see reported on the news is highly unlikely because the markets are fragmented, the onboarding on the different exchanges are fragmented, you often have significant spreads, and you have a very hard time understanding why it is, the price that is actually listed is different from the price that you get. Next slide, please, Greg. So all of these things serve to create an environment where we end up getting a lot of information about the digital asset space, but it's a lot of noise. And so people start clutching their pearls, being very, very concerned because there is a hard time identifying the signal as to what might make a significant investment. Now the other reason why there is a lot of noise in the space is the entire digital asset space is actually fragmented across a number of exchanges. You have different -- you have different fees, you have wide spreads depending on the exchange. You have different levels of execution quality, depending on if you're a decentralized exchange or centralized exchange. And then capital allocation itself isn't actually driven by where is the best place to invest, it's sometimes actually impacted by the platform you're investing on. On top of that, the actual flows are frequently distorted by tax regimes, regulatory regimes and access limitations. So what happens is observed inflows reflect what investors are able to invest in, but not what they want to or should actually own. So in this case, we're seeing that in the case of a lot of digital assets, it generates data, but the signal is oftentimes obfuscated. So we were looking at this several weeks ago, and we realized that there are some unique aspects to Valour and the DeFi Technologies ecosystem. Next slide, please, Greg. Yes. So one of the key things that is a significant differentiator about DeFi Technologies and our wholly owned subsidiary Valour is that for many of you on this call, if you're an equity analyst, you've been to business school, you're going to recognize some of the features that I'm talking about. We effectively represent an efficient market, particularly when it comes to the digital asset space. For one, we do have the broadest digital asset ETP lineup globally, as I mentioned. And that covers everything from Bitcoin to as I'll be discussing a little later, the Pyth oracle. We span the majors, Layer 1s, DeFi, like the hype token, thematic assets, even tokenized gold assets like the XAUT, the Tether Gold asset as covered as one of our ETPs. The other thing that is critical in terms of the solution set is that our products are consistent. We have a very clear pricing and fees that are transparent to the investor before they invest. So they're not going to see a price and then realize that the fees are going to change. Because the nature of the ETP space is we have to go through a significant regulatory process. We have a great team, a great product team that makes sure that we are in sync with all the exchanges that we're listed on, but that's actually quite significant. The next thing is that because we cover so many ETPs, you have excellent cross-asset visibility. I mean, I would suspect that most people on the call, whenever they're speaking to their wealth manager about digital assets, their knowledge of the space is somewhat limited, perhaps to Bitcoin. Oftentimes, it's limited to Bitcoin, Ethereum and Solana. But I can say, for instance, there are a number of significant Layer 1 chains, Layer 2 chains that are actually driving the future of digital commerce and stablecoins today. The other critical element as to what is unique and special about Valour that we capture in the DEFT VIO Index is that it focuses on real investor capital, real investor capital flows into the specific assets. Most of the time, whenever we're getting information about pricing on the news, it is a combination of DeFi protocols, centralized exchanges, and there could be significant leverage positions, sometimes it could be causing a massive movement. So whenever we're talking about real investor capital, we're actually getting a signal based on quality investments with transparent fees in an environment where the investor is effectively being able to make a decision based on the quality of the underlying asset over and above the vagaries of the platform that they're investing on. And that's thanks to the consistency and breadth of what the Valour Asset Management ETP platform has offer. Next slide, please, Greg. So to recap, one of the -- or some of the structural efficiency elements that really make it possible for the Valour ecosystem of 102 exchange-traded products to provide particular benefit is that it provides uniform pricing and minimal slippage. And we're able to support this because in the Middle East and Abu Dhabi, we have a market-making desk, which is designed to keep spreads narrow, and that's a revenue-generating opportunity. We -- our products are governed with transparent regulated fees that are disclosed upfront to investors in the base [ prospecti ] and final terms. Something that is very significant is our basing out of Europe primarily gives us effectively homogenous investor conditions. And even the products that are listed internationally are connected to the home European listings. So that homogeneity gives us special insight and data that we're able to provide to the index and a degree of consistency across information access, to some extent, tax treatment and broker availability. And I think, finally, what we look at is these consistent risk profiles of liquidity models and pricing frameworks exist across all of our products. Why are these solution points relevant? Well, is because it represents an efficient market, which gives -- means that we're able to provide meaningful signals about flow and investment to other investors. So in a matter of speaking, the DEFT VIO Index is in essence, providing a data framework of efficient signaling as to opportunities to invest in digital assets. But primarily, those opportunities are solidified and 100% in sync if those investments are made via the Valour family of ETPs. Next slide, please, Greg. So as far as the definition and scope, what we're looking at is the DEFT VIO Index, the DVIO Index tracks the top 50 individual digital assets by AUM within Valour's ETP product offering and each constituent represents real regulated investor capital with index adjusted weekly to reflect changes in capital allocation and net flows. Andrea, would you be able to comment on the principles and your view on what the index represents?

Yes, absolutely, thank you Andrew. So the index is basically based upon three major principles. The first one is, as we mentioned, is AUM-driven, assets under management driven. That means it's really grounded in actual capital allocation. The second one is we are not just looking at the assets under management, but it's also flow aware, but it's responsive to changes in investment behavior. And the third one is, it's rule-based. So it's fully transparent, it's auditable. And we expect people and investors can, in the future, create some financial projects upon that. Let's look at the methodology. If you can go to the next, Greg, please. So I'd like to deep dive into the methodology of the index, how the index is built and maintained. Every week, we have a rebalancing. So we start with the base weight calculation. There is a selection criteria for the assets to be eligible for the index that is they need to rank among the top 50 assets within Valour product offering. After that, so we started with the base weighting on the AUM, but also we had the flow-driven adjustment, given by two major KPIs that are proprietary that are the flow magnitude on one side and on the other side, a flow acceleration. These two KPIs basically monitor the capital [ convention, ] the flow magnitude is defined as the total net flow divided by the total AUM for that specific asset. And the flow acceleration is actually looking at the last 4 weeks average flows and gives a forward-looking approach and view on the specific asset. So then we rank the assets given this inflow component from the strongest flow to the weakest one. And we basically adjust with an adjustment factor, the base weight calculation to get to the final index weighting calculation for the specific week. This process is repeated on a daily basis for calculating the value of the index, but for -- the rebalancing is done on a weekly basis.

Yes. And I think -- thanks, Andrea. I think one of the critical elements is some might ask, well, what happens if you have a black swan event or an exogenous shock. And we tend to use a lot of moving averages over a specific period of time, which will be addressed in order to ensure that the signal you're getting is smooth and based on a longitudinal view of the underlying data. And it's not based on an exogenous shock that result -- can result in somewhat of a flawed or incorrect or statistically perhaps unlikely signal. Next slide, please, Greg. Yes. So from here, we can talk about what are the main things that people can learn from the DEFT VIO Index. How does the index move, what does it show? Well, to put it simply, it highlights the assets, and by assets, we're talking about the underlying Valour ETPs. It's critical for everybody to understand that the objective here is to highlight the underlying Valour ETPs because that's what we want people to invest in. And I'll also explain how actually last week after only -- I think it was approximately, we set our index base value from January 16. So after 2 or 3 weeks, this actual index assisted us in closing a 7-figure deal, a low 7-figure deal into one particular ETP because they were very interested in seeing the influence of an investment within the product, and I'm sure that will be released at some point when we provide further statistics on the index. But at a base level, we're showing price performance. We're showing flow magnitude, which is an indication of outsized inflow into a particular asset as it relates to the underlying AUM. And of course, as Andrea previously exchanged -- previously indicated, the index weight change. And I have to admit my favorite particular report every week is seeing the top 5 gainers. And this is something that I think people are going to find interesting because sometimes whenever you're looking at a market that is particularly bearish, you'd be surprised at the great returns some of the underlying Valour ETPs have. Andrea, can you comment on things like the flow price divergence and the signaling that we provide?

Yes, absolutely. So the flow price divergence table is actually one of my favorite. So what we do there is we compare the insights from the gainers and the losers in terms of the performances and inflows, and you can have different situations. You can have, for example, very strong inflows and very strong price during the week for a specific asset. Let's imagine like Bitcoin in 2024. So you are in a bullish territory, for example. On the other side, you can be on a situation where you have very strong outflows and falling price. That's easy to understand. But all the situation in the middle represent a potential opportunity. You might be in a situation, for example, where the price of that asset is falling. But on the other side, given the insights we have, we see there are inflows into that asset. And that to me represents a potential opportunity that is not evident if you only look at the price, but you can get an insight from the inflows.

Yes. So I think there's something else that should be noted. And for many of the people on the webinar, if you're shareholders or you have an interest in DeFi Technologies, there's something fundamental that we're able to do when we're having the discussion about the DEFT VIO Index that is hard to do if we're just talking about a straight single digital asset, Bitcoin ETP. Right now, we have the ability to provide unique and proprietary insights about activities, investment activity within the Valour ETP ecosystem. And this is critical. Why? Because it means whenever we're speaking to asset managers, alternative asset managers, asset allocators and the media, and we're doing public speaking at events, we're not in a situation of just talking about one digital asset, we now can talk with the backing of actual data about the broader market and how our particular ecosystem is very effective based on the actual capital flows of communicating what's happening in this broader market. The second benefit to that is now we have a tooling that is directly linked to our underlying assets. So when we talk about a particular ETP and why we believe it's an excellent potential investment opportunity or why we believe a private wealth management operation should be listing our products as available to their potential high net worth clients or their asset managers, we're able to do that within the context of a narrative that is tied to our entire product set. And that's a very important discussion to have because the world we were in, in 2022, where it was innovative just to be able to have access to the underlying digital assets is a different world that we're in today. Now we're having to compete on the basis of information. We're having to compete on the basis of the efficiency of our products. And what this does is it highlights our competitive advantage in a unique and proprietary way. Next slide, please, Greg. So here, we can sort of look at why certain assets are gaining momentum beyond flows and prices. And the idea beyond this is what is the outcome of the DEFT VIO Index. So it's one thing to have quantitative measures, but how can an asset manager, a wealth manager, a broker-dealer, prop trader gain any insights from this information. So look, we are now an infrastructure company. We have data, and we can now present this data via the DEFT VIO Index on a weekly basis to these firms so it can help them make better investment decisions on the basis of capital inflow-driven signals. And this is critical because all too often, and I have to say, I feel for our Investor Relations professional, Curtis, we're in a situation of just, oh, the movement of Bitcoin is this, do something about it. But now we can actually give specific insights about specific tokens and projects and ETPs that are happening within our ecosystem and communicate this on a regular basis with the partners that we need. And we can also do this globally. So when we talk about the DEFT VIO Index, we're no longer in a situation of just getting specific insights for one market that we can only speak to. Our information is now as valid in Toronto or New York or Brazil or Africa or Asia. And I think that's very, very critical because the data is quite solid. Andrea?

Yes. So this is an addition to the weekly report. We are also producing some in-focus report. where we try to basically answer the question why. So why this specific asset, we're focusing on the top assets for the week, for example, is moving up, why it's having such a strong performance? We scan the market, we try to gather information across major funnels like listed companies, stablecoins, RWA projects, and we produce an add-on for the weekly report. I think we're going to explore this further later on during the call.

Yes. And I think this is actually a pretty critical development because we've been in many meetings where people say, "Look, we understand what you're doing. We understand a bit about Bitcoin, but what is Solana used for?" Or for instance, a few weeks ago, there was an ETP that was covering the MANTRA token that had a huge jump in price. Well, people want to know why. Well, if you subscribe to our reports or you're a partner of DeFi Technologies and you're listing our ETPs, you will know that every week, you will be getting a compilation of top movers. And this also will list to you perhaps elements in the news and projects that they're involved with that can explain why a particular asset is performing really well. Now from our perspective, this is also a fantastic way to have continued interactions with the foundations because those interactions are critical to onboarding in-kind seed data, seed investment into our ETPs. So the foundations are also always looking at ways at communicating their excellent projects, their innovations. And whenever there is a price movement or a flow magnitude movement highlighted in the DEFT VIO Index, the weekly report, the in-focus report will be able to give investors a sense of this, and that's a good way of foundations being able to communicate what the key highlights are for that particular period. Next slide, please, Greg. Andrea, the...

Yes, sure. So we also have -- within the report, we have two major barometers. One is the flow sentiment barometers that is basically a composition of three major pillars. The first one is the [ net flow ] breadth, measuring how many assets are having inflow compared to how many assets are having outflow during a specific week. We also have the well-known flow magnitude KPI as well as flow acceleration. And all that combined together, they give us a sort of a fever of the market. Market is growing, the market is going down or how active is the market actually. On the other side, we also have the altcoin barometer. This is basically a measure of are we in a Bitcoin-dominance market or altcoin season. But we don't look at the price here. We look at the inflows that is some information we have. We look at if there's a dominance in inflow for the Bitcoin, for example, compared to altcoin, that -- it means we are in a Bitcoin market. If there is more inflow for the altcoin compared to Bitcoin, then we -- our barometer says we are in altcoin season.

Yes. I think this is actually really important because the current assessment of risk on and risk off assumes the entire digital asset space is correlated and moves in one direction. But as we'll be able to demonstrate a little later, that's not always true. There's people making money depending on -- regardless of which direction the market is moving into. So I think we're able to provide more granular assessments within the digital asset space. And this is made possible by the fact that we operate our own internal efficient market. I think that's very, very critical. If you're making the decisions based on independent tokens alone, well, you don't know. You may have a hard time. It may take you a week to set up an account. It may take a long time to close a transaction. And the spreads, because they don't have their own market-making operations, may be such that whatever benefit that you thought you could get when you do the calculation doesn't exist. But within the Valour ecosystem, we have this efficiency, this upfront transparency, and we're therefore able to give real signals based on real activity. Next slide, please, Greg. So we do have a watch list and all the things we've discussed here, you're going to get the privilege of seeing an actual report because I think that's a critical element of this. It's one thing to describe what we're doing, but it's always helpful to actually see a real report. And yes, Andrea, you can go over these elements, the main KPIs and the key insights that you should be able to derive from the watch list.

Yes. So as I mentioned before, the index is basically a view on the top 50 asset by asset under management within the Valour product offering. But we're not leaving aside and forgetting about the other small cap. That's why we have the watch list here. So the watch list is actually providing KPIs like price performance, the flow mining to everything we have seen before, but for the assets that are not eligible for the time being for being -- for participating to the index. And it's -- I think it's critical here because it potentially unlocks opportunities for pre-index alpha opportunities that are within this product offering, but they don't show up in the index yet because they don't get to the threshold of the assets under management. It's a very interesting watch list for investors to look at.

And thanks, Andrea, for that. From a presentation and sales and growth perspective, we're able to display how our exchange-traded products are institutionally relevant because we're able to give signals of these longer-tail ETPs that still have the same accessibility and liquidity of a Bitcoin ETP. And I think it should be noted that as many of you may know, some of you may not know, oftentimes in Valour, we may have a Bitcoin Zero, we may have a Bitcoin carbon neutral. We may have several ETPs that cover one digital asset. What is also unique and interesting about the DEFT VIO Index is we're doing this on the basis of the amalgamation of all our digital assets. So if we have three ETPs, we're calculating the movement of the index as if we've consolidated those ETPs so that you're getting real signal because it doesn't make sense to isolate a Bitcoin Zero with a Bitcoin yield generating and a Bitcoin carbon-neutral ETP because all of those are basically signals for purchasing the Bitcoin product. So with that, Greg, I think it would be really nice to -- let's jump into the report, and let's see what we can do with that. So -- thanks. So right now, you're looking at the -- Greg, can you show the cover of the report because I think the design team likes -- we'll just take a quick look at the cover of the report, if it shows up. But if it doesn't, that's okay, too. Yes, the design team worked very hard on this. They like the styling. Okay. So if we move now to the index overview. This report is a 4-page document. It's very, very simple. And it's designed to be an effective weekly report that will be provided to equity analysts, alternative investment managers. And because our industry is very linked to Bitcoin, we do use Bitcoin as a baseline against the DEFT VIO Index. Look, it's no secret that the last few weeks and actually indeed since October 10, the crypto markets have experienced significant volatility, and there's been movement -- significant downward price movement. But what we noticed when we were examining our intelligence system, which I posted about previously because we had to build a significant infrastructure before being able to get the insights from the index is that there are indeed opportunities that are consistently identified, and we would only be able to come to this via the index. But before I hand over to Andrea to talk about, for instance, the index components, the top 10 assets, the weightings and what it means, I want people to understand that one of the most powerful indices in finance today is the S&P 500 because it gives a broad array of -- a broad view of market performance. And one of the most common investments if people want to have a well-diversified portfolio is to invest in an index fund that tracks the S&P 500. Now these are early days yet, but it goes without saying that the ultimate goal of any developer and maintainer of an index is to create an index and tooling platform that other financial institutions can use to underpin their investments. Why is that relevant? Well, if somebody creates an investment from the DEFT VIO Index, then it follows that the capital used to invest in that index investment is deployed in order to match the results of the DEFT VIO Index. It is deployed into the DeFi Technologies Valour Investment Opportunity Index component investments. And that's really what we want to demonstrate. We want to demonstrate that in this age of tokenization that the idea of our single digital asset instruments, it's powerful. It was innovative. The fact that our founder and CEO, Johan Wattenstrom created the world's first Bitcoin ETF back in May 2015. I mean, that was a revolution in and of itself. But now what we're doing is we're creating a data-driven framework to enable tokenized instruments and traditional instruments to use our ETPs as an underlying. And that's a very important aspect of being able to drive additional inflows over time into the Valour ecosystem of products. Andrea, if you wouldn't mind helping us with the index composition.

Yes, absolutely. So as you can see here, we have on the first page of the report. We have the comparison against the benchmark. You can also check it out on a, let's say, more live chart on the website as well. The inception date was about mid-January, January 16. So that's where we set the index value at 1,000, and we are measuring the performance against that. For [ index ] composition here in the section, we just explained a little bit briefly what we have already covered in the presentation. We have 50 digital assets. You can see the top 10 here, the concentration on the top 10 and the top 3 asset concentration as well. As I said, the rebalancing is done on a weekly basis. And every week -- not every week, depending on the results of every week, you can have some token joining the index and some other token leaving the index for that time being. Like for example, this week, we have promoted QNT token to be part of the index. If you scroll down, Greg.

And I think this is, for us, probably the most exciting page. I mean, every Friday night, we actually spend a lot of time trying to figure out what the new entrants are, what the winners are, what the losers are and trying to get an understanding of what these assets are because we haven't seen anything like this, and this is all generated purely from Valour ecosystem data. Now the beauty of this report is we do highlight the top gainers in flow magnitude, weekly return and the index change. But there are a number of tokens that you may not be necessarily familiar with. But what I can say is when you do receive the report, if you highlight the token, it links directly to the underlying Valour ETP that is used as a component of that particular instrument. So everything that we do with the report, we have to emphasize. It's designed to drive capital into the universe of Valour ETPs, whilst also giving alternative investment managers clear signals about what is happening in the space. Now some might ask, and perhaps I'm jumping ahead in terms of the questioning, well, if somebody gets a signal but decides to invest in a particular product outside of the Valour ETP, is that a negative thing? No, that's not a negative thing because enhanced demand across the market is generally good for all the digital asset holders. But we would say that the signal that you're getting is based on the efficient market pricing and data that you're getting from the Valour ETPs more so than perhaps a rug-pull or pump-and-dump scheme that many sometimes hear about. Ours tends to be based on rational investors making actual capital allocations in an efficient market. Andrea?

Sure. So here in the second page of the report, what you see are the major tables. We have the top 5 gainers across the three dimensions that we mentioned before, so the weekly returns, the flow magnitude, the index weight change. And it's interesting to see, as Andrew mentioned before, that even if we are in a difficult market situation, there are assets that are moving very fast and they are having very strong performances. And those are the ones that we want to highlight with the in-focus report that we're going to show later on. We have one prepared for Pyth, for example, that we're going to explore later. Then we have the flow price divergence table that is the one I explained before and mentioned before. And finally, we have an inflow analysis that we haven't mentioned before, but that's focusing on the top 5 inflow assets by magnitude. As you can see here, for example, this week, we have [ Ethereum ] having the strongest inflow magnitude across our ETPs.

Yes. Look, one thing I'd like the audience to understand is we will be issuing these reports. We issue these reports every Monday at, I believe, 3:30 p.m. Central European Time, which is 9:30 a.m. New York Time. But this is weekly return. So when you look at the top 5 gainer figures right there, for instance, we chose Pyth for a specific reason in terms of the strength of the DeFi space and whatnot. But for that week ending February 20, so up until last Friday, it had a 9.94% return, right? So we're able to get signals on actual buying, selling within our ecosystem. And traditionally, we tend to have very sticky investors. People don't tend to day trade ETPs. So they're strategically investing as buy-and-hold investors. Now obviously, when there are significant market movements, some people take profits and they sell. It is a market. So in every market, you're going to have buyers and sellers. But the interesting thing is when we have these movements, it tends to indicate a stronger signal than price movements, for instance, on a decentralized exchange, which may have limited liquidity and can be impacted by one player just making a particular bid. So we've done inflow analysis. Let's take a look at the watch list and the altcoin barometer on the final page, if you don't mind, Andrea?

Yes, sure. So here, we have what we mentioned before as a watch list. So this is actually monitoring the assets that are outside the top 50 by assets under management for this week in terms of the index composition. Again, you can see very interesting signals here. You have some pretty good returns on above 10% for some of these tokens, even if they are a small cap for us. And they might be eligible very soon if they keep on the good performances to be part of the index. Finally, we have the altcoin barometer. As I mentioned before, it's a proxy of are we in a Bitcoin-dominance situation or altcoin season. For this week, we are in a Bitcoin dominance given the inflow of Bitcoin products that we have, we're higher than the -- greater than the altcoin inflows products that we have within Valour.

So I think this provides great conversation, selling tools and analysis for opportunity to make an investment in what I'll refer to as a longer tail altcoin or digital asset because all too often, the concentration of the news, they just talk about the Bitcoin price, as I've mentioned before. Now we're able to have a specific narrative based on actual investment taking place within our Valour instruments. Now Greg, could we move to the Pyth in-focus? So just to give a broader overview, we've discussed the methodology and the rationale behind creating the index. Now we have just concluded discussing what the index report is that gives an overview of the capital flows, price movements, flow magnitudes within the Valour ecosystem. But that is not enough. It's not enough to just give a link or tell them, look, this specific product is there and doing well. What we now want to do is tell the alternative asset manager on a weekly basis why a particular digital asset ETP has outperformed. What news is there? What is that particular digital asset underlying ETP? And this is what the DEFT VIO Index in-focus report provides. For the purposes of this demonstration, we've created it for one particular digital asset ETP. But on an ongoing basis, each week, it would most likely contain several, right? It can have five, it can have three. We go through a process of selecting which ones to highlight. And if you don't mind, Greg, if you could just go to the next page. Yes. So if we could scroll to the top of this document, what you're going to see is this document is one page. It's designed to be simple, clear and drive business to how you can gain more information on the ETP, what the ETP is, what the metrics are for that week and where it's available, where it trades. Now it may say -- one may say, that seems so basic. But in this world where I think the coin market cap now has 1,000 tokens under measure. We want to cut through the noise and provide clarity both on signal, clarity on what the underlying exchange-traded product is, clarity on the metrics that make it interesting and lastly, clarity on how to access this particular product, this particular Valour instrument, which exchange or broker and how you buy. So this is what the in-focus report does. It will tell the alternative asset manager what the actual chain is. In the case of Pyth, it's an oracle. And what oracles are, there are sources of truth that are used for smart contract execution, particularly in the world of decentralized finance. And the token is used to help assure the quality of data, which is normally price data or temperature data that underpins the information that is deployed to validate the state of a smart contract. And a smart contract is basically a decision-making tool that happens on the blockchain. So what we want to do is we want to be able to explain to asset managers, "Okay. So you've seen a ticker. PYTH, it has had a 9.9 for -- near 10% weekly price movement. The AUM increase maybe wasn't that significant, but it's also had a relatively outsized flow magnitude for the amount of AUM it occupies within the Valour ecosystem." As you extend and you highlight over the actual PYTH network [ SEK, ] that actually takes you directly to the PYTH ETP within the Valour ecosystem. And of course, we highlight the ISIN and the Bloomberg code for that particular instrument because the main objective is to drive traffic to those particular instances. So the other key element is that we highlight news for the week that could possibly explain why it is -- there's been an interest in that particular digital asset ETP. So these are designed to give an alternative asset manager some context for providing additional research on a particular instrument. Yes. And what else? What we like to do is, in each instance, we will provide our commentary in terms of what the particular ETP does, the particular underlying digital asset. And then we also use the opportunity to communicate directly with the foundation so that they can provide information or insight or commentary as to why they view the positive movements in their particular instrument for this week. In the instance of this particular report, given that it's so fresh, this is a quote taken from a particular press release. And just as a point of clarification, I just want to highlight that the AUM increase and flow magnitude numbers are actually -- they're inverted here. So it's actually the AUM increase was at 9.96% and the flow magnitude was at 0.02%. So I do apologize for that oversight. But yes, so this is a brief sense of what the in-focus report is, and these would be provided for all the leading assets that are highlighted in the DEFT VIO index. Andrea, any further insights?

No, I think -- yes, just to mention here, what we do is actually we also have the name of the related Valour product linked to the specific asset. You have the ISIN, you have the Bloomberg code, and you also have a link to the main brokers where the product is listed or available and the exchanges where actually the product is listed. So yes, I think that's all we have for this new release of the in-focus report.

Thank you, Greg. I think with that, we've given a significant overview from the deck as to the rationale and the business and value with regards to DEFT and Valour. We've highlighted the weekly report, and then we've gone to a specific drill down. So Greg, I think we are ready for the question and answer.

Perfect. We'll now open the session to questions. [Operator Instructions] I can see we already have a few. The first question is, what are some examples of digital assets that are negatively correlated with Bitcoin? And are they included in the index?

Yes. I -- so -- that's actually a great question. And I think that in order to be able to give a definitive statement about long-term negative correlation. And I'm going to let -- I'll let Andrea also provide his insight into this because this is probably more of a philosophical or academic approach. But you tend to need longer data sets in order to be able to make a definitive statement about a negative correlation or a positive correlation. Now as you may have seen, the index itself was first released on the 16th of January. That was our 1,000 base case, a 1,000-point base case for the index. So it was also released at a time where admittedly, we've had historical uncharacteristic downward flows and AUMs in the digital asset space across the board. So the short answer is I do not believe we can give a definitive answer about negative correlation after what amounts to approximately a month of index tracking. But the long answer is as part of the subscriptions, we will be providing quarterly overview reports, semiannual overview reports and annual overview reports. And I would expect that when you start to hit the semiannual overview report, by that time you're dealing with 100-plus days of data, we will be able to release information on what has happened at that half for the correlations with regards to Bitcoin for specific Valour underlying ETPs. I'd love for Andrea to also give his thoughts.

No, I fully agree with that. I think it's also on our road map potentially to develop further analysis and the correlation is actually a very good [ insight ] so we can potentially add in the future. So yes.

I think that will be really cool because whenever the market is saying that, oh, these -- the market is risk off. As soon as we can identify negatively correlated digital assets in that instance, then the assessment of risk off for something like Bitcoin might actually be risk on for that negatively correlated asset. So I suspect that we will be having continued insights with -- that we can communicate to the market.

Excellent. Next question, how does DeFi Technologies ensure that firms such as wealth advisers or family offices who subscribe to the index also use Valour's ETPs as opposed to, say, a product from a competitor?

Yes. That's a great question. And to be perfectly honest, there is no way to handcuff a wealth management firm or an alternative investment manager to exclusively using Valour ETPs. That said, the underlying data and the signals generated are indeed associated and generated from our ETP inflows and activity, one. Secondly, a big part of what we have to do as an asset manager is show a strong degree of thought leadership and innovation. The more we show that thought leadership and innovation, the more it gives comfort to asset managers to deploy their capital with us. And finally, as I alluded to previously, there is more to the index than just -- I think somebody wrote a comment saying, "Oh, wow, just celebrating an index." No. Indices are designed to create an alternative means for giving financial institutions and structured instrument creators a way of investing in an interesting strategic diversified portfolio of assets. The minute somebody creates an investment product and effectively licenses the index over time in the long term to create an investment product, that capital, by definition, will be flowing into the underlying assets, which are the Valour ETPs.

Great. Next question. Are there other opportunities to monetize the index beyond leveraging it as a marketing or sales tool for your ETPs?

That is a great question. And as I think I alluded to in the -- during the deck phase, yes, the easiest opportunity, as I mentioned, we closed a 7-figure deal with an investor who had significant capital. And they obviously had an interest in -- they had an interest in a particular digital asset token. And when we presented the index, they were intrigued by the fact that their investment made in our ETPs could have the positive effect of moving the index whilst increasing their exposure in the underlying digital asset. So it's not actually designed as a marketing piece. It's designed as a piece to highlight how, when and where to invest in a Valour ETP. The marketing benefit just happens to be a wonderful additional benefit.

Next question. How often is the index rebalanced and reconstituted? And what determines when an asset enters or exits the top 50?

Andrea?

Yes, sure. So I think we probably covered that, but yes, so the rebalancing is done on a weekly basis. So every week, we have rebalanced the index using the methodology we described before. And the selection criteria is to be eligible for being part of the index and asset should rank among the top 50 assets by assets under management within the Valour product offering.

We like to keep it quite dynamic because we think the way the digital asset space, the digital money space is moving, speed is actually critical. And as I have mentioned before, ultimately, what we're looking at doing is, okay, we can have an index or a strategy that is a subset of the index, and we can tokenize that or third parties can tokenize that. So we want to highlight the fact that what we can do with tokenization means that we can develop a Web3 native tokenized products that invest according to the index. In the future, we may also have the ability or somebody can decide they want to create an investment instrument that is tokenized that focuses on the weekly top 5. So because of that ability to use digital asset and Web3 technology, we're trying to make it clear to people that we provide fast data, fast results, quality data, quality results, and we're opening the floor to the DeFi space, the broader DeFi ecosystem to make digitized products off of our index, which is based on real data.

Nice. Next question. What elements of the index are unique to the Valour ecosystem? And how difficult would it be for a third party to replicate this index using publicly available data?

Yes. That's a great question. I think that the core -- the reason why we thought of this and developed it is because it uses very specific internal data on inflows in addition to the product AUMs. Now the product AUMs can be determined publicly. But determining the inflows at the speed and at the granularity that we have access to, I believe that would be incredibly difficult to recreate, short of, I don't know, releasing some sort of insight or information. And that's why we think it presents an interesting signal. But Andrea, what are your thoughts on that?

No, I fully agree. I mean we have a privileged view on the inflows based on the products that we have under Valour. So I mean, like that part of the index component is actually proprietary data basically.

I think it's important to point out as well that Valour operates its own internal trading desk. And as I always talk about publicly, one of the things that separates Valour as an asset manager from others is that most asset managers outsource their market-making and their trading of their instruments, while we keep everything in-house. So that enables us to pull more granular and immediate data.

Thanks, Curtis. I want to actually add to bolster both what Andrea and Curtis said, we actually calculate the index daily. Now obviously, it's a new product. But I think ultimately, like in one of our pricing schemes, I discussed having a business intelligence terminal as a license analytic tool based on this. So we're always pushing towards the dream of as real-time data as we can. But for now, we're very confident with the weekly data. In the back end, we're definitely working at daily pricing and information.

Next question, who is the primary target customer for this product? And how do you expect institutional investors or sophisticated retail investors to use the weekly report in their portfolio decision-making?

Yes. I think that's a great question. On a daily basis, we're speaking with buy-side and sell-side analysts who are trying to understand more about the DEFT business model, the DeFi Technologies business model. On a daily basis, we're speaking with brokers, dealers, proprietary traders, wealth managers. Primarily, in order, particularly in the alternative investment space, a big part of what you're dealing with is education. And we're in the position of having to educate people not just about our ETPs, but in some instance, about the entire digital asset space. So in terms of the primary target, we're looking at alternative investment managers and capital allocators. Now in that space, you're looking at analysts, you're looking at foundations, you're looking at wealth managers, you're looking at proprietary traders. We want to show them that with this information, they can make better decisions. And we also want to use this system as a way of hooking broker-dealers and platforms into working with us over another potential ETP provider, right? It's critical that we give additional value through the information for the purchase and transaction of some products in some instances that may say is commoditized. So whilst this is a product, it is also an informational framework for enabling us to have good discussions with asset managers, alternative investment managers, broker-dealers, proprietary traders and getting our products in front of the media.

Great. Our last question is around the pricing structure. Andrew, could you talk a little bit about the subscription tiers and how they're designed relative to other data or index products in the market?

Yes. That's a great question. And what we have is a 3-tier prescription model with preliminary pricing. Now we have done market reviews of different technical analysis platforms. And I think -- that 3-tier platform has a bronze, a silver and a gold tier. The bronze tier covers monthly reports. So you'll get a report like what we provided that covers activity over the course of the calendar month. And we're looking at providing that at USD 6,000 per year. So that's a competitive price point with other digital asset technical analysis platforms. But it should be noted that for us, this data is ours. This index is ours. And for us, the bigger objective is securing partners to be able to effectively use our index as an information point for the distribution of our underlying ETPs. At the silver tier, that's where institutions can look to purchase the weekly and the monthly reports. So they're getting regular weekly insights into index composition, rebalancing changes, constituent momentum and actionable market signals, and that is at the USD 10,000 per year price point. And at the gold, this is something that is still yet in development, but we have examined the price point and the product is under -- effectively under construction. This product is what will enable entities to license and create tokenized investment instruments using the DEFT VIO Index as underlying. We're looking at $20,000 per year at a single seat or USD 50,000 per year multi-seat. And what the value proposition there is, is a real-time business intelligence dashboard with access providing continuous visibility into the index performance, capital flows and constituent movements. So that is what is needed if you're going to build a tokenized instrument with the index as an underlying. But the main objective of this is to make sure that we're driving value into the full range of Valour ETPs. And this is going to be particularly important as we move towards the launch of our actively management certificate (sic) [ actively managed certificate ] products and our UCITS fund because those products will also contain our ETPs or our exposure to our digital assets as underlying. So we want to make sure that our data proposition is strong as we speak to institutional investors, and we communicate a lot of this information to retail investors at the same time. And Andrea, do you have any thoughts on the utility from an investment professional perspective?

Actually, I think we covered everything. So yes, I just can kind of repeat a little bit as a recap. So I think, yes, for investors, analysts, researchers and foundations might be very relevant. So yes, I think those are potentially primary targets. And the different tiers that we have also might allow different investors and stakeholders having different exposure to this product. So that's why we have designed also the monthly, weekly and the real-time [ VI ] dashboard.

Greg, there's one thing I'd like to add. Again, this is our data, our product. So we're always innovating. And as I've mentioned, now we can have a basis since it's a complex product driving discussions about tokenization, licensing. So I just urge asset managers in the space, get in touch. We'll make it happen. We have a great team, a great product team, a great technical team, a great data team. And this is effectively a new era, a new product set within the Valour ecosystem based on quality data of our underlying 102 ETPs.

Perfect. Thank you, Andrew and Andrea. That concludes today's webinar. A recording will be posted on the IR section of our website shortly. Thank you for joining us today, and you can now log off.

Thank you.