How Does Crypto Compare to Other Asset Classes? | European Blockchain Convention 9

[Music] 2 1 morning morning everyone great to see you I think uh Mano isn't going to be able to make it he sends his apologies he's uh he's not feeling very well so just uh just the four of us not five but hi um my name is Andrew rmer I work for a publication called digital Frontier you won't have heard of us yet because we are launching at the end of the year uh it's a new london-based tech publication reporting on where technology rubs up against the worlds of business finance and culture um so that's me uh maybe just to kick us off give give everyone a little uh potted buyer of yourselves and I have a little Icebreaker question for all of you as well um feel free to tell me to to to bug her off if I'm being too naisy but uh tell us about yourselves and then tell us uh What proportion of your personal investing portfolio is in invested in crypto uh let's go along the line Carol test okay yeah um my name is Carol I work in a cryptology so centralized der uh spart and derivative exchange you probably didn't hear about us we're going to start a lot of things this year we mostly focus on the European markets but uh offer things for retail institutional projects everything uh bit about me I work for five different exchanges I was a qu team member for bybit bit Gat um Tex PG I work for a lot of exchanges uh it's not healthy but I have 90% of my savings in crypto Punchy Punchy uh one go next all right yeah I'm Tony hi guys um I'm a GP here at fores Adventures uh we help bit get invest primarily in the private markets um we manage about $400 million today investing in early stage crypto um as well as liquid strategies um I personally spend most of my time focusing on the application layer um um we're based out of Asia but we have teams in um Europe uh we have a team member in Lisbon we have teams in um San Francisco in New York and a lot of people in Singapore and Shanghai so um yeah so the question um I have about I think 80% in [Laughter] crypto George yeah I'll start with the second part yes I'm I'm I'm I'm in the same risk risk bracket these guys are uh I'm the founder and CEO of pant we're institutional Prime broker so we tailor to professional clients in the space offering a One-Stop solution so uh a hedge fund can come to us and start trading with one account on uh a multitude different centralized exchanges decentralized step into the ogc liquidity borrow land cross margin manage their risk raise money through Capital introduction functions and so on so typical a classic Prime broker but for the digital assets thank you very much for that um yeah so first question from meno um there's lots of different places where people can invest their money what's the pitch like what's the attraction of crypto as a as an investment class um sorry not for meno for uh uh for Carol Carol go for it okay go uh first word from my legal uh I'm kidding just be careful do your own research things like that uh you said what's the crypto NASA class first I'm not sure if everyone knows what uh asset class has uh so just black rock definition it's a grouping of of investment with a similar characteristics so when it comes to risk level possible return durations anything these are grouped together and I think one of the major issue when everyone thinks is like um grouping crypto together and I think that's incorrect uh crypto first mimic a lot of the other traditional financial instruments you know you got the equities you got bonds cash real estate Arts gems and all of those could actually be replicated within the blockchain like I know some people who do um nft gems nft obviously for art was used a lot U equities tokens right there cash stable coins so every first crypto can have all of the traditional asset classes just digitalized on the blockchain and it open UPS possibilities to having new very Innovative asset classes so I think crypto is actually not going to replace but supplements and increases the number of asset classes and possibilities for financial you know opportunities and freedom for people I don't know if that's exactly what you want to hear but essentially for me it's uh crypto doubles down or more than doubles down the number of asset classes for for everyone also makes it a lot easier for people to access certain things like uh shares you know are you ready to buy your Shir at $1,000 or something it makes it much easier lower entry of barrier uh as as long as you know crypto and now with companies such as your company it makes it much easier to try to enter the world of crypto and what we doing too so I think it's uh it's really the future of Finance I mean we all know it we know all love crypto I'm pretty sure everyone here is like yeah go crypto main stream is not right there yet but it has very strong promises what's uh what are the downsides it's a said word from our legal uh cryptocurrencies are still very unregulated MAA is coming in Europe that's very good we all know about the ETF for Bitcoin there is more and more regulations and uh you know proper players institutional money coming in that obviously wants good uh regulations follow up things like that I know it's unpopular but I'm actually happy that FTX happened because that brought a new level of scrutiny and looks I hate what it did for the markets my portfolio took a hit and as you know I've got 80% in there uh but at least it just brought a number of you know level of scrutinies and attention towards regulations which not always popular and I also like the wild west aspect of crypto but it it it's better it brings in better scrutiny and it's also very complicated for people but it's getting better and better so downside is it's money it always feels like you know people always say like magic unicorn money crypto Etc but it's still very um you need to pay attention it's complicated you need to pay attention but there's a lot of possibilities I want to I want to bring in George here like do you in your mind have the same separation between different parts of the crypto market like talk us through that process uh well speaking of uh the the upsides and the downsides from from that perspective yes we we will look at the crypto as an you know a Bitcoin ethereum as as a more of a commodity Lu look alike ass a class stable coins are becoming increasingly the uh the the payment instrument right so this there's a combination of uh FX and commodities and uh again the application of blockchain can go infinite right so we we can basically say anything uh wrap anything within crypto um but again on on the downside of things right so where where we we seeing still a lot of uh uh issues is the integration uh of crypto into the mainstream banking for example from a personal use standpoint how do you pay taxes how do you uh report how do you uh the bank will ask you simply you know where where's the money coming from oh it's for crypto oh okay thank you very much we closing down your account so that kind of stories is basically very typical thing and that's what we are still dealing with and the regulation uh is probably the solution to this problem but uh you know we are sort of anticipating that things will change in the mentally as well in terms of adoption of the technology adoption it's here to stay Tony I have a question like whenever I talk to professional investors they are talking about uncorrelation they want uh they want assets that are uncorrelated from each other can you can you talk us through this concept of correlation uh what is it and why is it attractive to have assets that aren correlated from each other when you're [Music] investing um yeah I I think like crypto you can't really say it's uncorrelated right to the broader market like the market itself it's a derivative of liquidity all of our kind of bets on crypto today we betting on the FED lowering your rates in the next cycle right it's a matter of liquidity so when liquidity comes like all all all boats rise right so um when we say crypto the correlation between crypto and other kind of mainstream assets I think the only thing like most of us think about as an investor right is that the risk and growth profile a crypto companies are very different from like the traditional startup companies um in the tech World um I used to do investing at seoa and a lot of the projects that we invested in needed a lot more capital to get off the ground um for it to go into IPO say 8 or 9 years 10 years later right but for crypto the cycle is much faster so when we look at correlation in this aspect um it takes much less Capital um but much more risk obviously much less Capital but much more risk to get that certain level of like growth profile that you want so I think when we look at correlation um between crypto assets and traditional like TMT growth assets that's the biggest thing we think about but from a liquidity perspective like when you exit right it's still the same you need a lot of people to be um investing in this market you need a lot more liquidity in the market you need institutional investors to buy into the story taking a step back and getting even more basic like what what is correlation well Cor relation is when well the the relationship between how two certain assets grow right if they're 100% correlated they grow in line with one another if they're 100% um well when they're 100% positively correlated they grow one in one with each other when they're 100% negatively correlated they one goes up the other goes down when they're not correlated the growth of one asset doesn't impact the other asset that's how yeah so then I guess again like kind of a basic question what why is that a good thing like if if if you've got if your portfolio is currently moving like this why why is it beneficial to add something that moves differently I guess like I'm getting at the heart of like portfolio Theory here like is that correct or J want to come in on that one that reification is basically the key rule in any uh portfolio investment so when we talking about you know correlation of different asset classes why you have to have you know 60 40 whatever 60 bonds 40 equities is a golden rule sort of a for portfolio and then we can add other asset classes and so on so the more correlation you uh the more diversification you have in your portfolio the safer it is typically right so Tony you're you're a venture capitalist so VC is a is a market that's generally closed to all bit wealthier investors is kind of accredited investors should the wealthy invest differently to regular people like me like uh how does that work in your mind I mean the only reason why VC is closed off to many um public investors right is because the RIS risk profile is not something the regular investor should stomach our funds are um we have an investment period of at least 3 to 4 years we have an exit period of another 3 to 4 years so often times s it's closed for 8 to 10 years um for the regular investor like just from a personal perspective I don't think you should be locking your money up for that long right and VC returns over the years um historically they haven't beaten S&P 500 right the only reason why BCS exist is because they are supposed to help certain investors capture Alpha that they can't can't capture elsewhere um and the way we capture that Alpha we have to spend a lot of time we have to spend a lot of money to trial and error right we invest in maybe hundreds of companies in the three-year period but how many of them go up into to become a unicorn right maybe less than 1% and the typical investor shouldn't stomach that risk that risk should be for the professional investor the wealthy um um because they have like they have the risk appetite to lose that money because typically the vcm the typical VC firm loses money okay uh I want to bring George back in here and talk about macroeconomic shocks so how does uh how does the crypto Market respond to a macroeconomic shock you know something like uh war in the Middle East for example I guess well we we've seen a number of uh history uh events that showed in how crypto um acts in in in uh macros shocks again so it's it's a very broad definition right so we're talking about from the trading perspective and we're talking about uh you know a covid pandemic for example as an as an as an event we've seen that in that situation crypto acted like a risk asset basically everybody was selling everybody was selling everything how how do you define a risk gasket just for the 101 crowd yeah so that that's yeah that's another broad definition as well right so if we talking about U uh a high volatility typically is a is a risk asset uh but there's other components such as you know jurisdiction uh industry etc etc right so there's there's multitude of risk factors you can cling to to Krypto and uh you have to obviously consider it as a as from from multiple different ways and and again when we talking about macro components as well right so macro shcks can be different like inflation is a macro shck and in this particular scenario uh crypto acts as a as a as a save in the century right so it's a bet against inflation in a way so U you cannot just blindly say it's a you know this or that or and and uh have to have to look at each individual macros shck individual how how about central banks I mean what happens when central banks uh add liquidity into the market by cutting rates or remove it from the market by raising rates I guess particularly the the Big Daddy of central banks the Federal Reserve like how how does the crypto Market respond in in line with the with the equity with the with the risk asset pretty much so yeah so we we're waiting for rates to go down again for liquidity to flow in and uh yeah the the US prices will go up basically yeah and if I can for that back to previous question with correlation I think there's still a very strong correlation between trfi and you know crypto which include Define others um basically I think I don't know if you agree with me but microshoots within the traditional Finance are still affecting not always is not 100% correlated but there's still a very strong correlation but it's getting better like for me I think for crypto as a cryp as an asset class to be able to be developed needs to uncorr relate more and more and have different asset class within crypto to be able to uh not corate to the same microshot essentially as a traditional yeah I mean it's there's always a sort of an argument about what what is better for crypto to be uncorrelated or correlated uh we we seen that correlations to equities for example increasing as more institutional uh players coming into the market when we had you know Wild West retail driven Market I think it was wildly uncorrelated Wild and uh so it's it's a kind of a trend it's a development of the industry towards more institutionalization and uh sort of a less volatility as definition of a sort of a mature asset class versus an emerging market or emerging asset class so these uh these last few questions I have I want to open them up to to all of you as a panel so feel free to jump in if you've got responses feel free to argue with each other if you want that's always good highly recommended um so first first of all when I think of the world of investing assets I mean you've all talked about assets we we you've got the stock market you've got the bond market you've got these Alternatives uh real estate Arts all sorts of things so what's different today in 2023 in a world in which Bitcoin exists in which crypto exists versus the world of 15 years ago where there was no crypto if I'm investing now like what what has changed uh now that we've got this whole new class of in assets like tacked on the side to the you know the world that we already existed you know in the ' 80s '90s 2000s well again I can draw analogy from the history as well there's an internet internet bubble right so which which kind of uh uh similar in in in many different features of of what crypto has has done to the to the space in the last few years right so it was similar type of hype uh uh a lot of a lot of unfounded hype as well we've seen a bubble burst and we've seen that bubble burst in crypto as well number of times in fact and there's a there's a cycle of sort of uh maturing and uh evolving as as an asset class uh so in in a nutshell yes it's it's the history is always repeating itself and uh uh this these Cycles are pretty much always the same and me if you take crypto uh not just as an asset class but as an asset uh it it follows the development of any emerging market and uh emerging technology sort tiny you um I I think like what's majorly changed is that obviously we've seen a lot more consensus being built around um Bitcoin and e as like um as assets that can kind of uh beat deflation inflation right um but at the same time if you look at eth a lot of the other layer 2os a lot of defi crypto has become much more usable um and as these tokens become much more usable as they have applications I think a lot of regular investors um and users of these Protocols are realizing that this could be something of value right this could capture value similar to a stock but it has has much better liquidity uh well not necessarily much better liquidity but much better accessibility right you don't have to open Stock brokerages accounts to buy crypto um you do might need to do kyc to on-ramp Fiat but there's a lot of other ways to really get money on board as well so I think today like the biggest thing that crypto has actually solved is the Freer flow of money um especially at smaller to amounts I think crypto as a payment mechanism is probably the biggest use case today um obviously we're looking forward to social we're looking forward to gaming looking forward to nfts and all of that but the payments aspect of it has really gotten a lot of people much more excited about the use cases um let me give you an example there's a lot of like there's there's a lot of like payment issues in China um given Capital controls and everything um and there are a lot of crypto related companies that try to solve this right um make it easier to take payments um make it easier to onboard users without having to kyc and this has all been solved through crypto and nothing else can really solve this like China is like 98% cashless today but still there's just so many payment issues that cannot be solved through traditional Financial rails and I think crypto itself as these years as like more regulation comes into place as kyc becomes much clearer um the easiness of onboarding in payments um gaining yield through defi will make crypto a much more accessible asset for the masses you don't have to add anything you don't want to it's fine should we move on yeah okay I'll go yeah go for it so for me I want to go a bit back to what uh we said before with the trend and history okay I said I see uh crypto and uh blockchain Technologies are a continuation in the train of History where back in ancient times everything was uh basically correlated towards the physical assets you're like this is my gold this is how much I have and when you wanted to save money we had this idea you know you you hide your gold uh like in the garden you keep your money under your mattress or something and it's becoming with the internet bubble and everything is started to be uncorrelated more and more to from physical objects towards more utilities and there's a lot of democra ization access for the masses towards this type of uh Financial opportunities and freedom so I'm kind of like back in in both Corners like yes trend is kind of repeated but it's continuing I think it's a it's a step further and it is more democratized like now you can have a lot more people can try to accumulate wealth and don't need to you know carry these huge amounts so it's going more towards ideation utilities you can uh everyone can come in can go out um and also what you mention mention with the cashless actually for China it's very easy to pay without cash compared to Europe like you said China has a lot of problems with payment solution when I live in China actually I just go around with my phone and that's it everything that's everything I need but here back in Europe you can't do that like if I want to take the subway if I want to um to rent an apartment in France it's it's crazy you need a a lot of things so I agree what you said but I think it's even worse in Europe and in the US with the access towards what you can do with your money like how you can use it there's much way too much you know regulation paperwork things like that and block that's why blockchain could try to democratize that process too I don't know if you agree yeah no I agree like what when I say um in China like the payments there's just a lot of regulations around what you can pay for right um for example I don't know if you guys use WeChat but WeChat there's a lot of limitations on how much you you can pay a certain people in a certain amount of time um and if you're setting up like a group and you want to kind of take payments from your fans or sell something within these groups there's a lot of um Big Brother controls that WeChat does right that they don't allow you to do if for example you're trading well not trading if you're for example if you're taking in upwards of 100,000 a month your group might get shut down because this is a centralized issue right like they think you might be doing money laundering they they think you might be selling sex or something right selling like taboo so crypto solves that because ultimately like I think as human beings right we all want freedom to do what we want to do we want freedom to buy what we want to buy without somebody telling us well we whether or not we can do it so my point is more around like even though China is 100% cashless it's all centralized within like two or three entities that can determine whether or not you can pay for this right um but I think crypto as a payment instrument goes around that I want to I want to come back to this uh this sense of whether crypto is a safe haven the kind of place that when investors feel scared they'll push their money towards or whether it's more of a risk asset the kind of place where when investors feel bullish and happy then they'll push their money towards I'm getting the impression from everything said so far that you're all on the page that it's it's more of a a risk asset but is anyone kind of willing to make the case that that crypto is a is a safe haven a start or you guys go ahead yeah so I mean we all at 80% so I think we still feel it's pretty good you know my my point is I go back to what I said initially it's it's not crypto asset it's there's many types of assets within crypto some of which mimic equities and still very collated towards other things so there is very safe like if you want to do a lot of the staking now there's more and more staking with very stable assets relatively to crypto for example give us a few examples of the safer ones I mean for me e is very it's still fairly volatile but I mean so is the traditional Market you can also have very high volatility it's been in the last two three years it's been with within the same range and you could with sing you can actually grow so even if the price likly goes down your portolio value doesn't change much uh there is a lot more of this like you know layer one blockchain sell I mean sell it depends how you take it but there is some of these stable things and then you have I mean nfts which obviously comes with in different variation we mentioned before art real estate Etc nfts could do this uh but the very in regul is still with wild west but you have a large variety of assets and even some that are entirely new not even a replication of the the normal one so i' would still say you can find safe ones and you should again as you mentioned Tony like diversification diversify between traditional Finance uh crypto take some some with a risk some with save save actual money like you know like have some disposable income like have a good diversification between all different types of asset but crypto is not like when you ask us do you have 80% how much you have in crypto we say 80% but not in you know it's like 50% in something fairly stable 20 in some things I think will go up 10% is high risk and you know it it really depends uh for me it's not safe or unfe is it depends on which assets are taking crypto you can you can have your money in crypto and have a fixed income return right so through staking whatever providing liquidity and some so on so forth so it's always it's always a again a it's not a cookie cutter approach you cannot uh cannot say if it's safe or not safe in in in each situation when when we're talking about inflation it's probably a safe heaven we're talking about uh owning your money owning uh owning your wealth and being able to pay or transfer it's a safe heaven as well uh but again is it a is it you know is it acts like an a risk asset most of the time yes it does the other there's another term that's come up a bit while we've been talking which is this concept of uh volatility so maybe for the I don't know the more entry level people here like can someone have a stab at defining volatility for us and then uh talk us how how does volatility impact how you think about making investment when you know that the volatility is X like what does that mean when you're allocating Capital to that investment so volatility is a magnitude of the the price swings right so when when events happen right the high High the volatility the higher the risk the higher their swings so it's it's basically for when we're talking about okay well what's your appetite for risk you essentially mean what's your appetite for volatility your portfolio may go down by I don't know 10 20 30 50 whatever 70% and uh that's that's how you define your your your portfolio your allocation strategy and so on anyone have thoughts on volatility I you seem very comfortable with it it's it's amazing to me I mean if anyone is in crypto I think you need to to be ready for some volatility depending on the asset class again you have Stables now it's not but like if anyone can we do like a raise of hand who was here in crypto in 2018 or before okay yeah this is what the third half I think then everyone here was used to the volatility I mean Bitcoin went from you know 20 to 6 to 3 to 10 to 9 to 20 20 30 60 like even it's still very very volatile for some of this which is what a lot of people come from you know there's a lot of fomo high people wanting to go Moon and that's fine that's a that's an asset class for me that's like a highly volatile new kinds um sorry to just just to add one bit it's also relative right so when when we talk about National currencies of Emerging Market countries they swing 50% you know when within you know similar patterns doesn't happen as often I'd say as as price of Bitcoin but still it does happen like that and uh uh Emerging Markets is basically what what we are living in I mean crypto is another Emerging Market built on technology I think it was like the ven dollar that went 50 times Argentina has over 2,000% inflation rate right so they they they curreny get poly dumped all the time and it's you know what what do what do you do you go to crypto as a safe hav an asset and if you remember we talked about how easy it is so like a lot of Argentina viser they they go and combat inflation which is another type of volatility if you want gener slower based volatility but still like I think we all saw the prices go up for everything that we buying in Europe and maybe over the world how is it in China like my friend also told me also increases the price um I think inflation in China has much lower than the other countries right because the monetary policy has much been much more conservative versus others okay so good but still a lot of it's still a bit higher yeah yeah okay so yeah so like it's it's a good again it's different asset class so if you want to combat volatility and inflation uh crypto away but it's not like everything is volatile you have different asset classes diversify portfolio I would recommend some taking some in high-risk things if you want to moon and go crazy but you don't need to and that goes back to what the discussion had before like uh people with a lot of money if you want to take high risks be ready to as I said the very beginning of this conference work from legal be ready to lose all your money that is very much true like I lost 99.5% of my portfolio on some of the high high risk ones so volatility can be good but you need to be ready to lose all your money don't only have like what what would you guys recommend like 10% in high volatile like personal not this is not a company policy personal indeed very personal talking about you know allocation that's allocation yeah I'm I'm quite conservative I prefer using crypto but you having a fixed income kind of uh streams rather than just betting on nfts for example right that's um I think we have like two and a half minutes left or something like that um can we can we take a question or two from the audience I don't know I haven't been briefed on this does anyone have a question stick your hand up if you want to no okay otherwise for the next run please guys bags down there's a bunch of people waiting behind so try to give them space otherwise they can't sit or just ask by the staff before start standing REM only standing REM only okay cool well if no questions we've obviously done a very good job but uh thank you very much it's been great um any any any way that people can follow you if they want to like keep up with your your comings and goings um maybe just are you on Twitter l stand here and uh obviously online Reach Out Tony if people want to keep up with you what's the best way yeah um we publish a lot of research on our website um we can just search for foresight Ventures Co on Google we have a stand we very at we at the entrance have close if you want coffee Donuts we have a campaign going on and bunch of Q codes you can try them on yeah nice yeah come check out the stands if you want to get in touch with me probably LinkedIn is probably the E way I'm quite a quite a googleable name it's a weird name um but yeah thanks very much for that and uh thanks for being a great audience thank you thank you thank you very much