Investing in digital asset companies has been turbulent over the past few years, to say the least.
Drastic growth followed in 2020 and 2021, when crypto wrestled itself into mainstream consciousness. The valuations of companies went parabolic, making early investors dizzy.
However, things have changed since then. Prices have declined along with the sector surrounded by scandals and capital flooding from space. Many projects have completely shut down, while most are trading well below their peak. Even bitcoin, which has bounced back this year, is down 60% since late 2021 from its peak.
Of course, the drawdown isn’t just limited to cryptocurrencies. The tech-heavy Nasdaq index lost a third of its value in 2022 as rising interest rates sucked liquidity out of the entire economy.
It is in this context that we spoke to Bandip Rangar, CEO of digital asset and fintech investment business Finakea International.
Finekia International Interview
Invez (IZ): The crypto industry has been devastated over the past 16 months. Even after an auspicious Q1, bitcoin is still 58% off its high, while nearly every altcoin is further down and company valuations have taken a huge hit (or gone down entirely). As a digital asset and fintech investor, how difficult has this period been?
Budip Ranghar (BR): The crypto market has been rough since May 2021. After bitcoin hit an all-time high in November 2021, the market declined by more than 50% during the summer of 2021. It’s been almost 2 years since the bear market started, but so far, we’ve seen good data year after year.
It is very common to see BTC (other cryptocurrencies) outperform during these difficult times, something that has already been seen in previous downtrends. Now of course BTC’s dominance is less, as there are many more projects that have a credible history and are seen as strong assets even during this “Crypto Winter”.
In fact, ETH is still +54% YTD and -62% from its all-time high, which shows how its performance hasn’t been much different than BTC. The overall crypto market cap is +44% performance YTD. It is true that BTC is outperforming the digital asset market, but since the beginning of 2023 the sector as a whole has been performing well.
Major drawdowns are common for altcoins, as are most small caps, with price fluctuations due to relatively small amounts of capital inflows. Some altcoins have been able to grow significantly. For example, BNB, ADA, and SOL did this in the last upward cycle.
IZ: Bitcoin only launched in 2009, meaning that until last year, it only experienced a relentless bull run in the broader financial markets. So this is the first bear market in the history of crypto which is happening with a pullback in the broader economy. Are you surprised that there has been such serious damage in space?
BR: In the previous bear markets, which were at their bottoms in November 2013 and December 2017 respectively, the BTC price dropped 85% from its all-time high. If a bottom is seen around $17,000, this would be the lowest level reached in this cycle, meaning a 77% drop in price. This would confirm the principle of diminishing losses and returns and provide a strong signal that digital asset markets are more resilient in difficult macroeconomic conditions.
Invezz Commentary:
In November 2022, bitcoin reached a low of $15,516 (albeit briefly). This drawdown of 77% may be smaller than the 85% drawdown of previous cycles, but only marginally. To us, this doesn’t feel like solid evidence that the asset has become more resilient in tough macroeconomic conditions, especially in previous periods (2013 and 2017) when things were good rather than tough in the broader economy.
Additionally, bitcoin was highly illiquid in 2013 and 2017, and the capital required to move the price is much less than it is today. For this reason, we believe this highlights just how dramatic the pullback was this time, as the crypto market fell from a $3 trillion market cap to less than $1 trillion. In 2013, the cryptocurrency market cap fell below $2 billion; In 2017, it reached less than $800 billion. We find it difficult to speculate and draw meaningful conclusions about the sensitivity of macro positions from the price action of 2013 and 2017.
crypto valuation
IZ: After strong price action in Q1, what do you think of crypto valuations currently?
BR: I think investors still think short term.
There is a lot of uncertainty with regard to the possibility of a worldwide recession and, consequently, the monetary policy of the US Federal Reserve and other central banks. Investors are constantly adjusting their positions, as it seems difficult to predict or even imagine what level the price might reach in 3 or 6 months.
Certainly, it can be said that the digital asset market boom is really strong and, so far, BTC is the best performing asset when compared to other indexes like the S&P 500 or the Nasdaq. This can be seen as an indicator of the long term future of this market.
IZ: You mention the metaverse, gaming and NFTs as some of the areas you could focus on with your planned new “Finakia Glass Slipper Venture” fund. All of these sectors have performed exceptionally poorly since the crypto bubble burst last year. Where do you believe these areas will turn?
BR: We must remember that this field is quite nascent. As you mentioned in an earlier question, BTC was launched in 2009 and ETH in 2015. Most other assets were not launched until 2017/2018. Even newer are subsectors such as NFTs, gaming and the metaverse.
Admittedly, these markets have not matured yet and that is why we have seen speculative bubbles around these subsectors, but the technology is here for the long term and has solid use cases.
In the financial sector, interest is growing for the tokenization of real assets, enabled by unique features within NFTs such as smart contracts. Similarly in gaming, blockchain technology allows players to actually own in-game assets and trade them on secondary markets unlike before. This is an opportunity for Finqia to identify early adopters of this disruptive technology and capture value before they go mainstream.
IZ: Will there be any benchmark for the performance of the new fund? Will it be within crypto (such as one aiming to outperform bitcoin) or a more traditional benchmark (such as an index fund like the Nasdaq)?
BR: Finekia Glass Slipper Venture Fund will be benchmarked against early stage VC funds investing in alternative assets.
IZ: How do you deal with the high level of volatility in the crypto space and the lack of regulation under which so many coins and companies operate? Does this make it very difficult?
BR: This is a trade-off in dealing with digital assets.
Investors are well aware of the volatility of the crypto market and the fact that their portfolio can go up or down by several percentage points, but this is what they are looking for. People who invest in T-bills or S&P 500 stocks are different types of investors most of the time.
The other scenario is a typical traditional finance (aka Tradefi) investor who wants to diversify his portfolio and allocate a small portion of it to a more volatile environment. In the end, it’s just a matter of risk tolerance. People investing in crypto know that it is not like investing in other markets and so they are ready for it.
The lack of regulation is the main reason why we at Finaqia are building digital asset financial products that are properly licensed and regulated for our target audience of investors. Due to the number of risks and the difficulty for investors to navigate the crypto market, Finqia acts as a bridge allowing investors to invest in the digital asset market without going through all the steps required to buy and hold assets directly. gives. FinKia allows investors to gain exposure to digital assets in a secure and regulated manner without worrying about the complicated process of purchasing such assets directly.
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