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Into the mainstream

Alexandre Schmidt
Equity Index Manager

“As more capital flows into this space, these assets are becoming less volatile – even with all the geopolitical turbulence”

As cryptocurrency moves from the margins to the mainstream, it has become ever-more attractive for thoughtful investors. Sitting down in his London office, CoinShares’ Alexandre Schmidt highlights what those approaching the space need to know.

How have attitudes changed towards digital assets?
Early adopters of Bitcoin were tech savvy people. They recognised that this was a robust technology – and a robust asset – for ordinary people. For those outside of that community there was no way of knowing that back then. Not without digging deep into it. People saw the industry as a kind of wild west even up to 2019, when I got involved. Today, there’s been a wake-up call on the sell side.

What do new investors need to know now?
It’s hard to focus on a single characteristic, but you can look into what the market is adopting and what regulators are looking at. Right now the most important trend is definitely regulation. It’s happening in the US, which is the biggest capital market in the world – and it’s going to dictate what other jurisdictions will do.

Is this still perceived as a “volatile” asset class?
When you look at Bitcoin’s behaviour over the last few months it’s actually quite stable. It’s a clear signal that the asset class is maturing. Equities and bonds are just as tricky. Serious, long-term investors know they need to understand their capital allocation back to back. The same applies with crypto.

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Understanding the basics

Marc P. Bernegger
Entrepreneur

“Bitcoin is the next phase in the evolution of how you exchange value, one that’s more suitable to the future”

As co-founder of Crypto Finance Group, whose 2021 acquisition was one of Switzerland’s largest, self-described “geeky tech entrepreneur” Marc Bernegger became a legend in the industry. Here, he explains why digital assets still excite him.

As an early adopter, has your eye always been focused on returns?
For me, the price was always more like a side effect. It was a real-time endorsement of the potential and value Bitcoin generates. As long as you have an asset which is just increasing in price, that doesn’t automatically mean that it has a real purpose, right? That’s just speculation, which was the perception in the early years. Now, we have an ecosystem which is helping on-bank people to get access to assets – it wasn’t the core idea, but many regulated financial institutions are using it as an investment to diversify their portfolios, to have a hedge against all kinds of unexpected happenings. The journey is astonishing, and, as always, you don’t know where it’s heading.

How should investors apply traditional ideas like diligence to crypto?
If you really want to look at digital assets, then you need to understand Bitcoin because it’s the foundation of everything. It’s like a new asset class. I don’t think anyone knows the right framing yet and that’s why you should really look at it as a long- term investment. If you were to invest in something, normally you’d read the yearly report or meet the team of a start-up you’re backing. What’s the foundation of Bitcoin? Reading the white paper by Satoshi Nakamoto should be the first step.

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The power of adoption

Christian Catalini
Founder

“With Bitcoin, it’s simple. There are only going to be 21 million coins and most of the supply is out, so it’s a fixed supply”

As the founder of the MIT Cryptoeconomics Lab and co-founder of international payments company Lightspark, Christian Catalini has long explored the potential of digital assets. Today, he remains one of the field’s most respected voices.

Has the market matured since Bitcoin was created?
The internet used to be a very strange place. It’s the same with crypto. It started on the fringe, but inevitably, as technology matures, it becomes domesticated. Financial markets are finding all sorts of interesting use cases for these new digital assets. We’re now moving into a phase where, once the technology is implemented, it’s going to be a lot more reliable than the current system in catching bad actors.

Is cryptocurrency’s “volatility” overstated?
The first thing I tell anyone that’s approaching any asset in this space is “Don’t look at the price of it on a linear scale – look at it on a logarithmic scale.” A lot of the turbulence disappears if you look at the price of an asset like Bitcoin on a log scale. What you start to notice is that it really follows adoption.

What should investors look for investing in crypto?
These systems will become the fundamental plumbing of the financial markets. Still, there’s a very high degree of uncertainty. Look for proof that there’s actual, real adoption in any form behind these networks, to be sure that this is worth investing. You can draw your own conclusions on how the economics of it will change with adoption.

Find out more at coinshares.com