What is the BED index strategy?

BED stands for Bitcoin, Ethereum, and DeFi. These are considered the essential components of the open finance or bankless revolution. It is based on the thesis that each of these holdings capture the upside of three investment crypto themes, in equal weight:

• Bitcoin — the “digital gold” or store of value
• Ethereum — programmable money
• DeFi — decentralized finance

Methodology

For this dashboard we will access the performance of the BED token. To do this we will look at the price chart of BED since launch and see how it compares to the general market: the S&P500.

To calculate the price chart of the BED token, we will use the ethereum.token_prices_hourly table using the contract address of the BED token: 0x2af1df3ab0ab157e1e2ad8f88a7d04fbea0c7dc6. We then take the average of the hourly prices of per day and plot it.

To calculate the price chart of the S&P500, the Mirror protocol was used. This protocol allows users to trade mirrored assets from the stock market. On Mirror, the mSPY asset exists, which is the mirror version of the SPY index, a well known S&P500 index tracker. To calculate the price chart, the terra.oracle_prices table was used. We then filter for the asset mSPY to get the prices and again take the average of the price per day.

We also calculate the price of BED against the S&P500 by dividing the price of BED by the price of the mSPY per day.

Performance

Who should go Bankless?

The BED token looks to be for people who are used to the benefits of index funds and what exposure to the crypto market. The BED token seems to be more for beginners in the crypto market, as users who are already knowledgeable in the crypto market are probably capable of rebalancing their Bitcoin, Ethereum and DeFi holdings.

However, if the BED token is for beginners, it has one fatal 'flaw'. The BED token is only available on Uniswap, meaning that beginners have to set up a MetaMask wallet, send funds to this wallet and find out how Uniswap works, before being able to purchase the BED token. Not to forget that these users will have to pay Ethereum fees to purchase the BED token, which is probably a factor that alone would scare away beginners, let alone setting up MetaMask and funding it.

Therefore, it does not seem obvious who the BED token is for currently.

Conclusion

As for performance, the BED tokens seems to be outperforming the S&P500 in a bullish market, but will also have significantly more downside when the markets turn bearish compared to the S&P500. Therefore, from a performance perspective, the BED token seems to be for users who want a little more risk.

When it comes to actual potential investors however, the BED token is falling between the cracks. For crypto beginners, who are the target group of the BED token, it is too hard to acquire BED tokens. For more experienced crypto users, who are able to acquire BED tokens, the token does not add much value as these more experienced users are able to manage and rebalance their crypto holding themselves.

BED aims to be a product for crypto beginners to onboard into crypto exposure without needing to execute multiple transactions on multiple platforms, incur high expenses from rising “gas” costs (like a processing fee on the network), or actively monitor the market to rebalance allocations. (source)

We can see that the S&P500 has seen its all-time-high on January 4th 2022 and has been trending down since then. It is currently down 11.6% down from the ATH.

Bitcoin and Ethereum saw their ATH on November 9th 2021 and have been trending down since then as well. It is currently down 51% since its ATH.

The performance of the BED token against the S&P500 looks very similar to the price chart of the BED token against the dollar. This is because the S&P500 is so stable compared to the BED token, it can almost be considered as stable as the dollar. The bed token is down 47% against the S&P500 from its ATH against the S&P500.

If one would have invested $100 on the launch, into both BED and the S&P500, one would have $110.8 at the ATH of the S&P500 on January 4th 2022, but would have over $200 at the ATH of the BED token on November 9th 2021.