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Polkadot price surges as ESG crypto hedge fund reveals DOT token purchase

By Raphael Sanis

Edited by Charlie Mellor

13:27, 5 October 2022

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ALGO/USD
Algorand / USD
0.2249 USD
-0.0097 -4.190%
ATOM/USD
ATOM/USD
9.6491 USD
-0.5175 -5.130%
BTC/USD
Bitcoin / USD
16863.20 USD
-167.75 -0.990%

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The DOT coin on grass
DOT has the lowest carbon footprint out of all cryptos, according to the Crypto Carbon Ranking Institute – Photo: Shutterstock

DOT, the native coin on the Polkadot blockchain, climbed from $6.38 to a high of $6.53 on 4 October following the revelation that Modular Asset Management’s crypto hedge fund has included the cryptocurrency.

DOT to USD

Based in Singapore, Modular Asset Management describes itself as an “Asian macro alternative investment” company.

Launched in May 2022, its Modular Blockchain Fund takes an ethical environmental, social and governance (ESG) approach. It prioritises cryptocurrencies that promote sustainability.

Sustainability focus

The crypto industry, especially bitcoin (BTC), has been criticised for its intensive energy consumption and unsustainable practices. This has led to the rise of green tokens, those that use efficient consensus mechanisms.

Modular is betting that these cryptocurrencies will be rewarded by investors for their sustainable practices. Daniel Liebau, chief investment officer, told Bloomberg:

“In digital asset markets, we believe that the adoption of platforms is very much tied to good sustainability characteristics.”

This has informed the choice of tokens in its crypto hedge fund. As well as polkadot, algorand (ALGO) was included, which prides itself as a carbon negative network, along with cosmos (ATOM).

ALGO to USD

Is Polkadot the greenest blockchain?

The Polkadot blockchain, which uses a proof-of-stake (PoS) variant, was recognised as one of the most sustainable in the blockchain industry.

XRP/USD

0.38 Price
-1.720% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.00362

ETH/USD

1,234.97 Price
-1.830% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 5.00

DOGE/USD

0.10 Price
-3.850% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.0012180

BTC/USD

16,863.20 Price
-0.990% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 60.00

A Messari report in August found that the network had one of the lowest energy consumptions when compared with other blockchains.

Similarly, a report from the Crypto Carbon Ratings Institute (CCRI) found Polkadot had the lowest carbon footprint.

ATOM to USD

Are sustainable cryptos profitable?

While DOT did see a slight rally following the Modular news, it has been struggling with this year’s bear market, compared with proof-of-work alternatives.

Bitcoin (BTC) uses almost 900% more energy than DOT according to a Messari graph. However, as of 4 October, it was down 57% year-to-date (YTD), whereas polkadot had fallen by 77% in the same peroid.

Other green tokens included in Modular’s hedge fund have seen larger falls over the past year compared with BTC. ATOM has dropped by 64% YTD and Algorand had plummeted by 79%.

Liebau acknowledged in his interview with Bloomberg that the ESG strategy could struggle in the short-term. He said: “Not all of these sustainability characteristics are clearly adding an excess return today.”

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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