Cryptocurrency innovation vs the hype: an inside view


Disclaimer: These are all cryptocurrency advocates, not skeptics. But some of them, like analyst and writer John Robb, bought bitcoin when it was priced at a dollar; today it is trading at around $ 32,000 per coin. Maybe some are worth listening to?

What is important about cryptocurrencies, from an individual investor’s perspective?

Robb, author of the Global Guerillas Report, a research series: “It’s a long bet on an area of ​​technological innovation that could transform the global financial economy. Some cryptocurrencies exist primarily to store and transfer value, but others exist to enable financial activities such as lending and borrowing, or sending money to family members around the world. Robb calls it “a new system that has the potential to compress and drastically reduce the steps required to do everything we do today, while adding a bewildering variety of new capabilities not possible with the current system.”

Dave Balter, CEO of Flipside Crypto, a startup that provides analytics and visualization of cryptocurrency-related data: “For any investor to have access to sophisticated and transformative investment vehicles, there is a distinction between states- United and them. If you wanted to make a really interesting loan strategy, and you called Fidelity, they would say, “Are you accredited? It’s risky. “An example: getting higher interest rates through loans made using cryptocurrencies, without any of the downside protections of a federally insured bank account.

“The belief that there is downside protection for investors is a misconception,” Balter said. “I’m not a die-hard libertarian, but downside protection is simply the faith that your government is going to do the right thing at the right time, and right now they are printing trillions of dollars.” Many see cryptocurrencies as a good hedge against the inflation of government issued currencies.

Matthew Walsh, Venture Capitalist, Capital Island Ventures, and Former Vice President, Fidelity Investments: “Silver has been represented by seashells and commodities” like gold in the past. “Now money is controlled by governments, but we’ve only been in this paradigm for about 150 years. Cryptocurrencies, Walsh says, are digital forms of non-sovereign money, and the underlying software code is “open source,” which means it can continuously evolve to support new capabilities, and has a high level of transparency. It is, he says, “a powerful idea.”

What is overrated right now?

Walsh claims that some of the more established cryptocurrencies, like Bitcoin and Ethereum, have a proven track record and are widely accepted and used. But, he says, “It’s dangerous to go through the list of cryptocurrencies and try to find an undervalued coin, and hope that it will be the next Bitcoin or Ethereum. It is not a winning strategy.

As an example, Walsh says he’s watching Dogecoin, a Bitcoin parody that premiered in 2013, “more in the larger context of memes actions, where you have groups of people coordinating to make something. more valuable thing. It’s almost like an organized pump and dump, ”he says, referring to programs in which people promote an investment to increase its value and then cash in.

Balter says trying to find the next cryptocurrency that will jump in value is “just like the stock market – it’s the game.” But before you do that, he advises finding out about what you are buying and understanding the range of options. “Hunting out what you don’t know is probably not a good idea,” he said, citing a friend who didn’t want to have to figure out how to put money into Polkadot cryptocurrency, but had heard that ‘she had good upside potential and wanted Balter to make the investment on her behalf.

Robb: “At first glance, crypto is a huge boiler house that has managed to convince millions of people to invest. It can feel like buying “hot” Internet stocks from the late 1990s, he says. But some cryptocurrencies, and the new financial and technological systems they enable, will generate a lot of wealth, Robb argues, in part because so many talented people are now working to improve this new kind of financial technology. It is possible that one day soon, “cryptosystems will quickly swallow up huge swathes of the existing financial and economic system,” he says. “At this point, the hype becomes reality. “

Semyon Dukach, Venture Capitalist, One Way Ventures: “I can’t tell you for sure that anything is overkill. It’s a strange world, where in some cases the hype itself can become an essential source of long-term value, which would normally be a total contradiction in terms. But when a new cryptocurrency is launched, he says, “a cult-like belief is exactly what is needed to achieve critical mass, disrupt centralized finance, and transfer some power from governments to non-hierarchical tribes. of individual participants spread around the world “.

What percentage of your assets are in cryptocurrencies and why?

Manasi Vora, vice president of Skynet Labs, a Cambridge data storage startup that uses a cryptocurrency called siacoin for payments: “Over 50% of my liquid assets are currently in crypto. I have a background in traditional asset and portfolio management, having worked in various banks and financial institutions in the past, ”including Santander Bank. “I see crypto as an alternative asset class in my overall portfolio, and similar to mid-cost dollar stocks and exchange-traded funds, I have a disciplined way of buying and building my crypto portfolio with pieces in which I firmly believe. ” Vora says that the appreciation in the value of its cryptocurrency assets over the past few years is one of the reasons they have exceeded that 50% level.

Drew Volpe, venture capitalist at First Star Ventures in Cambridge: “I have about half of my liquid investments in crypto. We are at the start of a fundamental new technology that will change how the financial system, markets, the core of the internet, art, and many other great parts of our world work. He adds: “Obviously, this is not investment advice.”

Dukach: “Less than 1%, because I am very careful with personal assets outside of my own investment in One Way Ventures, and I mainly stick to index funds and real estate, because I have no time outside of managing the fund to do the research necessary to make high risk bets. (Dukach, I must mention, is a former professional blackjack player who is featured in the book “Busting Vegas”.)

Balter: “More than my traditional investment advisor recommends today, and less than he recommends tomorrow.

Scott Kirsner can be contacted at [email protected] Follow him on twitter @ScottKirsner.

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