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.
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
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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.
A Messari report in August found that the network had one of the lowest energy consumptions when compared with other blockchains.
The crypto industry is leaning into the green energy movement.
Through drastic programming overhauls and funding carbon offset projects, protocols are actively breaking down the stigma that crypto is harming the planet. pic.twitter.com/4pFDedYIXb
— Messari (@MessariCrypto) August 11, 2022
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.”