Unprecedented Value Capture in Web 3.0

We are moving to what we believe is a new era of decentralisation. The next web, Web 3.0 will be an open web where anyone is free to innovate without having to be restricted to the walled gardens of the current web, Web 2.0. This is how we like to illustrate the coming transition:


 Web 3.0 will unleash a new wave of innovation.

Web 3.0 will unleash a new wave of innovation.

For entrepreneurs this is great news, anyone can build on top of a platform like Ethereum, that’s the power of a permissionless blockchain. They are not restricted by the terms of services for an app store and they don’t have to give away a substantial part of their revenues to a third party. For the users, the benefits are security (centralised databases sooner or later gets hacked), ownership of data and identity and the freedom to move your data between the coming ecosystem of decentralised apps, or ‘dApps’.

Another way to think about this transition is to look at the value capture in this transition. Union Square in 2016 published the now famous ‘Fat Protocol’ hypothesis. This is our simplified version of the fat protocol:

 Crypto hedge funds love the Fat Protocol hypothesis!

Crypto hedge funds love the Fat Protocol hypothesis!

The idea is that value is following the data, so when we move to a decentralised world where blockchains are the new protocols for data and value — that is also where most of the value will be captured. We will have a massive ecosystem of application on top of these new protocols, but that’s not where the majority of the value will accrue.

We would like to add to this picture by stating that Web 1.0 and Web 2.0 will still be present alongside Web 3.0. Just like we have some mostly static informational web sites today reminiscent of Web 1.0, as we move to a more decentralised web, today’s most popular services will likely still exist. Facebook and Twitter will very likely still be present on the web for a long time still, and they are likely to continue to capture substantial value even in the future. We are indeed perhaps not primarily decentralising the current web. Instead blockchain technology enables a much bigger web through human and machine interactions that simply wasn’t possible before.

Apollo’s vision of the future is therefore a much bigger web that can capture more value than ever before:

 Not only different but bigger!

Not only different but bigger!

Thanks to blockchain technology, we can now add substantial value to the current web, we believe mostly along three lines:

  • Digital Ownership. Blockchain technology makes digital ownership possible. Be it of money, data, identity or digital goods.

  • Smart Contracts. With smart contracts an open financial system will be built and available to anyone in the world. Borrowing, lending, derivatives and the democratisation of fund raising. A longer term vision encompasses the rise of decentralised autonomous organisations or ‘DAOs’.

  • Tokenisation of Everything. I’ve previously written on this topic and how real estate, hedge fund and VC interest will be tokenised and then later today’s liquid assets.

To summarise, Web 3.0 is less about the coming disruption of Facebook, Twitter and Uber and more about enabling new forms of value capture, uniquely enabled by blockchain technology. This is the exciting future we invest in and the reason we are so passionate about our mission at Apollo Capital.


Henrik Andersson is the Chief Investment Officer of Apollo Capital — Australia’s Premier Crypto Fund. The Apollo Capital Fund is a professionally managed portfolio of crypto assets, offering investors exposure to the fast growing crypto market. For more information, please see apollocap.io.

Apollo Capital, a16z Crypto, Polychain among investors in DFINITY

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DFINITY may well be the most exciting project of 2018. 

It is a visionary undertaking with an exceptionally talented team. Apollo Capital is proud to have invested alongside a16z Crypto and Polychain Capital. 

Apollo Capital invested in a $102 million round jointly led by Andreessen Horowitz (via its crypto fund a16z crypto) and Polychain Capital. 

Both a16z and Polychain were investors in a $61 million round DFINITY announced earlier this year. 

Why DFINITY?

DFINITY is a decentralised computation network that is able to make digital platforms constructed from trustless, autonomous, and open source software. The ownership and governance of these platforms is controlled by a distributed community of users and developers, rather than companies.

Why is having distributed ownership and governance of a computational platform a feature and not a fault? 

The answer lies in the outsized control that Web 2.0 incumbents have on almost every aspect of their user and developer base. 

a16z explains the extent of this reality:

Today’s web platforms like Google, Facebook, and Twitter control each and every interaction between users on the platform, each user’s ability to seamlessly exit and switch to other platforms, applications’ potential for discovery and distribution, all flows of capital, and all relationships between applications and their users.

Total control, in other words. A handful of companies dictate the rules of the game. 

This breeds mistrust and is not sustainable.

Today’s centralised platforms have an incentive to extract value from users and developers. This problem has become more acute as the relative power of platforms has increased substantially, locking users into walled gardens that house the network of most value.

What is DFINITY?

DFINITY is a scalable and sufficiently decentralised ‘Internet Computer’. 

A functional internet computer is a fundamental building block to a Web 3.0 economy, which itself relies of the data layer merging with the protocol layer at scale

DFINITY’s distributed computing network allows the creation of smart contracts, perhaps more accurately called verifiable programmable agreements, to run at scale. In doing so, DFINITY may perform a function that today relies on a myriad of organisations, companies, firms, people, and paperwork. 

a16z writes:

“The property of trustless verifiability is the core reason why DFINITY can credibly be used to disintermediate the central organizations that today mediate many of our interactions with others.”

A programme that is able to verifiably and trustlessly execute could be used to settle large swathes of the financial economy, for example, to mediate contracts about fundraising, trading, lending, derivatives, payments, to insurance which may be better expressed in code than in legalese.

The inherent efficiencies that this kind of internet computer could present to the global economy are too significant to ignore. 

However, it does rely on an internet computer that can perform at scale — for a user base of billions. This has yet to be achieved. 

Where DFINITY Fits In

Ethereumin its current state is clogged by simple applications with only hundreds of users. This is because Ethereum is a platform that relies on every miner in the network executing every computation. While this is strong in terms of security and decentralisation, it does not scale. Crypto kitties and FOMO 3D, hardly world changing applications, respectively consumed a large proportion of Ethereum’s network capacity almost rendering it unusable.

Ethereum is making headway on the scalability headache with state channels, plasma, and sharding, but the problem still hasn’t been cracked.

EOS’ssystem of delegates ensures scalability, but at the cost of decentralisation. By delegating a group of trusted and static actors, the cost of bribing the delegates is likely to be lower than the possible reward, exposing the network to human biases and greed. 

DFINITY, on the other hand, have devised a compelling solution, that sits somewhere between the currently unscalable but secure Ethereum and the scalable but potentially insecure EOS. It achieves this by randomly selectinga delegation each block. Because it is impossible to know who will be selected, and each block only lasts for 3 seconds, the ability to maliciously influence the network is small.  

Apollo Capital invests in projects that have the potential to radically reshape the global economy. Permissionless, open, and decentralised blockchains fuelled by a scarce token have the ability to collapse the cost mediation thereby replacing the plethora of middlemen that exist in our economy. 

Project like DFINITY could scale human collaboration to unprecedented levels by virtue of that collaboration not relying on trust. 

We are thrilled to have invested in DFINITY and look forward to being a supporting role in this important stage of their journey. 

James Simpson is an investment analyst at Apollo Capital — Australia’s Premier Crypto Fund. The Apollo Capital Fund is a professionally managed portfolio of crypto assets, offering investors exposure to the fast growing crypto market. For more information, please see apollocap.io.

Where We Invest

As crypto investors we believe it is of utter importance which ‘sectors’ we invest in. This is the first decision we need to make before getting into the individual coins or tokens. We have written in the past that value creation is happening in native crypto assets along ‘moneyness’ and ‘governance’. There is also an argument that Security Tokens will be a massive application of open blockchain infrastructure. Two crypto assets with exposure to the security token market that we invested in are TrustToken and 0X. Broadly speaking the crypto asset space can be divided in three segments;

  • Infrastructure Tokens: We believe assets such as Bitcoin, Ethereum and Dfinity belong to this category.

  • Utility Tokens: A typical example is Binance Coin, used to pay fees on the Binance crypto exchange platform.

  • Security Tokens: This can be representations of real estate, VC interest or private equity.

Is there any value in the middle?

Due to the velocity problem, it is questionable what value we have in the middle, the utility token space. In making investment decisions, we are largely avoiding this space since its future value is so uncertain. Apollo’s security advisor Eric Wall just published this 30 part Tweet storm on the problem with utility tokens:

ericwall ico tweet.png

Eric ‘Altcoin Slayer’ Wall is one of the good guys.

So where does all of this leave us? We have identified our core sectors or categories where we believe the vast majority of the value in the space will be captured. These are:

 Investing in the world of open source software.

Investing in the world of open source software.

 

Core investment verticals for Apollo Capital.

Note that there are also sub-categories, such as privacy coins and stable coins which we believe will play an important role in this ecosystem.

Crypto investors will have to determine if the market is big enough relative to the current valuation but also but also which investment properties matter. What makes crypto asset investments different from traditional investments is the open source nature of these networks. Being open source means that technology is improved and maintained by the community, and that most innovations (but far from all) can be copied and incorporated by any other project. 

Fundamentally, we believe that crypto assets will have relative trade-offs, you can’t optimise a network on all the important variables. These are some of the properties we believe matter:

  Investing in the world of open source software.

Investing in the world of open source software.

At the end of the day what you really have to evaluate are two things:

  • What is the project’s capacity to build the critical networks effect? Technology can to some degree at least be incorporated to the project over time.

  • Is the optimisation between the different ‘properties’ attractive and differentiated enough from other projects?

Value will accrue to moneyness and governance, not utility tokens. There will be a limited number of successful crypto assets that will be tremendously valuable. We will trust these blockchains to run the world’s native crypto assets, decentralised applications and today’s securities. Some of these blockchains will be as censorship resistant as possible, others will optimise on speed and privacy. Our job now is to build a diversified portfolio of assets to capture the future winners.

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Henrik Andersson is the Chief Investment Officer of Apollo Capital — Australia’s Premier Crypto Fund. The Apollo Capital Fund is a professionally managed portfolio of crypto assets, offering investors exposure to the fast growing crypto market. For more information, please see apollocap.io.

Your ICO Doesn’t Need a Token

We believe crypto assets have a specific function to play in providing the incentives to run a decentralised protocol. They are the fuel for running open, permissionless blockchains. The ICO hype created an environment where raising money became too easy. The result was that too many projects are trying to fit a token into a service or product where none is needed.

Blockchains are only valuable if they are decentralised. There are three major tenants of this technology and the applications running on top of them:

  • Creating censorship resistant applications: This can take many forms such as money, financial markets, gambling, prediction markets or social networks to name a few.
  • Creating permissionless applications: That is, an application that anyone can join. With Bitcoin you can be your own bank, or payment processor, without needing permission from a bank or credit card company.
  • Trustless applications: If we use a derivatives or a lending market, we don’t want to rely on the goodwill of a third party. With open source protocols anyone can inspect the code and the integrity of the application and engage in commerce with 0% counter-party risk.

This is a quote from fellow crypto hedge fund manager Tushar Jain:

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Don’t pitch something that’s an easy pass

Many projects are creating a token where Bitcoin or Ether could be used, or maybe one of the many stablecoins. This is especially true if you’re creating a simple payment for service.

We think these ICOs should be funded by equity. At Apollo Capital, we see a future with millions of decentralised applications — and these will primarily be funded by equity. Compound, is an excellent example of a decentralised application built on top of smart contracts running on Ethereum. Compound is funded by equity, they are not creating a specific token where none is needed. This is how Apollo Capital forsees value accruing in the Web 3.0 era:

On one end there will be 1,000,000s of applications mostly funded by equity. On the other end there will be 10s of core blockchains, such as Bitcoin, Ethereum, Dfinity et al. that run on, and in some cases are funded by, crypto assets. In between, we will have 1,000s of middleware crypto assets such as stablecoins, oracles, and file storage. Smart contracts built on top of blockchains will interact with these middleware building blocks. As an example, a smart contract interacting with a stablecoin and an oracle can provide the basics for an application providing trustless and permissionless lending and borrowing in this new decentralised world we call Web 3.0.

To sum it up — it is likely your ICO doesn’t need a token and if it doesn’t, it will become increasingly hard for you to get institutional funding for your project.

However, if your application is part of what is either a new core protocol or middleware project there might be a need for new a crypto asset. If you have unique technology and an ability to create the necessary network effect — come and speak with us!

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Henrik Andersson is the Chief Investment Officer of Apollo Capital — Australia’s Premier Crypto Fund. The Apollo Capital Fund is a professionally managed portfolio of crypto assets, offering investors exposure to the fast growing crypto market. For more information, please see apollocap.io.

Rebuilding the Financial System From the Ground Up

 ICE, the owner is NYSE just announced a crypto platform bringing crypto to Wall Street. Smart contracts will bring Wall Street to crypto.

ICE, the owner is NYSE just announced a crypto platform bringing crypto to Wall Street. Smart contracts will bring Wall Street to crypto.

Applications for Crypto and Blockchain technology can be divided into use cases that on one hand provide incremental improvements to existing processes and on the other hand offer completely new and groundbreaking use cases that weren’t possible before.

The former group includes implementations of private, permissioned blockchains. It also includes the potential tokenisation of existing investment products such as real estate. These have the potential to incrementially improve exchange of information, settlement times, make previous illiquid markets liquid and fractionalise all kind of assets. As an example, the stock exchange in Australia, the ASX, is implementing blockchain technology for their settlement system. Two years ago it was supposed to be implemented in 18 months. Now they are targeting a launch at the end of 2020 which will take settlement times from T+3 to T+1, an improvment, but hardly a revolution. Meanwhile, Bitcoin has provided global settlements in 10 minutes for nearly a decade.

At Apollo, we think the more interesting use cases are the groundbreaking possibilities of crypto rather than the more incremental, blockchain improvements. This includes fundamentally distrupting how ‘money’ works; the creation of native digital goods; smart contracts that can disintermediate a number of industries. Put simply, the real revolution is about digital ownership and contracts between parties without a trusted third party. This wasn’t possible before Satoshi Nakamoto put the wheels in motion almost 10 years ago.

We believe a particular low-hanging fruit for smart contract technology is financial contracts. Some of the areas being built right now include;

  • Lending and borrowing. This will first happen with cryptocurrency. Dharma provides a peer-to-peer lending market in crypto based on smart contracts. Apollo Capital just partnered with Compound to provide liquidity for the lending and borrowing of crypto assets. Compound will provide a trustless (without a trusted third party) way using smart contracts to increase the price discovery in crypto assets. Investors in Compound include the likes of Bain Capital. dYdX is another Silicon Valley firm creating price discovery through smart contracts. As an example, they are set to launch tokens that represent a short position in a particular crypto assets — we will then be able to trustlessly take a directional bet or a leverage long position by simply buying a single token.
  • The next evolution will happen once we marry smart contract technology with stablecoin technology. Some very smart people at organisations such as Circle, TrustToken, MakerDAO, Basis and Fragments are working on creating a stable cryptocurrency that is pegged to fiat currrency, a basket of fiat currencies or in the future, CPI. Once we have a reliable and trustless cryptocurrency that is stable, not only will merchant adoption for the first time be feasible but we can start doing lending, borrowing etc. pegged to our everyday currency.
  • Derivatives are well defined contracts that can be entered through smart contracts. With smart contracts, we can take derivative positions peer-to-peer without counterparty risk. Firmo is an example of a start-up creating a programming language for these type of contracts. Once Oracle technology (these provide a method for ‘real world’ data to be referenced in smart contracts) is developed, we will be able to make trustless derivatives based on any asset. Prediction markets like Augur are related to this development. Augur’s prediction market based on the Ethereum blockchain recently went live.
  • We have been writing about how all assets will eventually be tokenised. Once we have tokenised real estate, we will be able to put real estate in smart contracts which will open the market for mortgage-like products to be based on blockchain technology.
  • Oracles and smart contracts can provide the basis for insurance products that are running on a blockchain without a central company or decision maker — this is a potential Nick Szabo explored on the podcast with Tim Ferriss. One smart contract/DAO based insurance project is Nexus, they will start with insuring smart contracts. In the future we might see a wide range of insurance products being build on blockchains.

The future of finance might look radically different. The technolgy is here and the first applications are being built right now. Kevin Kelly describes in the book The Inevitable the unstoppable force of the momentum of an ongoing technological shift. Kevin explains that banning, prohibiting and trying to stop the inevitable is ususally counterproductive. We can and should regulate but change is inevitable. Crypto assets and blockchain technology is not going away, it is a force for good that can unlock tremendous value by disintermediating today’s trusted third parties. Some might say the future financial revolution is inevitable…

Henrik Andersson is the Chief Investment Officer of Apollo Capital — Australia’s Premier Crypto Fund. The Apollo Capital Fund is a professionally managed portfolio of crypto assets, offering investors exposure to the fast growing crypto market. For more information, please head to apollocap.io

7 Reasons You Should Definitely Not Invest In Crypto - From a Guy Who Co-Founded A Crypto Fund

“I hate crypto”
“What’s all this bitcom (sic) business about”
“Crypto is a scam”

I have spoken to over a thousand investors since launching  in November 2017. Despite meeting a number of savvy investors, many of whom have invested in the Fund, the overwhelming response to crypto has been one of caution and scepticism. By now, I’ve heard just about every response to why you should not invest in crypto. While some reasons for not investing in crypto are sound, others highlight common failings in investor psychology.

Let’s dive in and explore the 7 reasons why you should definitely not invest in crypto.

1. I Don’t Understand It

This is clearly the best reason not to invest in crypto.

Investors need to understand what they’re investing in, whether it be crypto, derivatives or exotic fish. A basic understanding is essential. Warren Buffett has said repeatedly, “don’t invest in something you don’t understand.”

Without an understanding, investors will not have conviction in their investments, will not be prepared for the investment journey and will likely make a poor sell decision.

There are two options for an investor that doesn’t understand an investment opportunity.

The first is to move on. If you don’t understand crypto, if it’s too complex or you simply don’t have the inclination to learn, the wise decision is to move on. Investors cannot be faulted for knowing their limitations.

Many investors don’t realise there is a second option: homework. Read, listen, watch, discuss and learn about the investment opportunity. Warren Buffett avoided investing in many of today’s most successful tech companies because he didn’t understand them. Perhaps he would have been even more successful if he made the effort to understand Internet companies? Applying this lesson to crypto, today’s investors might be more successful if they do the homework to understand crypto. For those interested in learning, our resources pageis a wonderful place to start.

2. Volatility

Crypto is volatile. Apollo Capital recently analysed the average returns of crypto Fundsand the results are fascinating. In a series of returns from June 2013 to April 2018, monthly returns varied from over -30% to over 400%. These returns are not for the faint hearted.

Investors need to know themselves. This sounds like a cliche, but it is true, especially when it comes to investing in crypto. Some investors can stomach volatility, some cannot. If the thought of the value of your crypto portfolio dropping by 20% in a given month makes you weak at the knees, crypto is not for you.

Volatility is relative to position sizing. The volatility of a given investment is relative to how much is invested. If an investor invests their life savings in crypto, the volatility would be extremely difficult to manage. The thought of losing 20% of your life savings in one month is frightening. However, a position of 2%, 5% or 10% of an investor’s portfolio in crypto might mean the volatility is less daunting.

Let’s take an example of investing 2% of a portfolio in crypto. If crypto goes down by 50%, the investor will lose 1% of their portfolio. While not desirable, most sophisticated investors can handle such a loss. Many investors don’t realise the potential upside from a 2% position. In a recent study by Apollo Capital, a 2% allocation to crypto from Jan 2016 to Apr 2018 accounted for 50% of the portfolio’s return.

It is also important for investors to distinguish between the volatility of an investment and the volatility of a portfolio. Including a volatile investment, such as crypto, in a portfolio does not necessarily increase the overall volatility of the portfolio. It all depends how that investment is correlated to the other assets in the portfolio. Crypto assets have shown not to correlate to traditional asset classes. Put simply, even though crypto is volatile, including it in a diversified portfolio doesn’t make the portfolio more volatile. Investors can have the benefit of the return potential of crypto, while keeping the volatility of their overall portfolio constant.

3. Crypto Has No Use

Here, I will go no further than to quote Marc Andreessen’s New York Times’ article “Why Bitcoin Matters”:

Critics of Bitcoin point to limited usage by ordinary consumers and merchants, but that same criticism was leveled against PCs and the Internet at the same stage. Every day, more and more consumers and merchants are buying, using and selling Bitcoin, all around the world. The overall numbers are still small, but they are growing quickly. And ease of use for all participants is rapidly increasing as Bitcoin tools and technologies are improved. Remember, it used to be technically challenging to even get on the Internet. Now it’s not.

Crypto is not perfect. Nothing at this early stage of its development is faultless. We constantly remind investors of two crucial facts. The first is crypto is a technological breakthrough. The second is many of the world’s smartest computer scientists and technologists are working in crypto. And now after the ICO boom, some of the smartest minds in tech are working on delivering on the promise of this technology.

4. Illegal Uses

One of crypto’s first popular use cases was for nefarious purposes. Silk Road was an online marketplace where users could buy and sell illegal goods, including illicit drugs and firearms. Users generally paid for goods with Bitcoin, thinking it was untraceable and anonymous. Many bad actors have moved on from Bitcoin, realising that it is in fact traceable.

The question becomes whether these cryptos are used solely for illegal activities, or whether this is just one use-case. For example, the Internet is used for illegal activities, including piracy, identity theft and terrorists communications. Should we call for a ban of the Internet because it is used for Illegal activities? Yes the Internet is used widely for illegal activities, but this is a tiny percentage of the overall use of the Internet. Applying this to crypto, what percentage of the use case of crypto needs to be for illegal activities before it is worth banning? 10%? 50%? 100%? This is a tough question and different people will have different answers.

It’s impossible to know how widely crypto is used for illegal activities. Top researchers in the space have stated that any reported figures are, at best, an estimate. There needs to be a clear distinction between something that is designed for illegal activities and something that might be used for illegal activities. If something is designed solely or primarily for illegal activities, it should be shut down. Silk Road is a clear example. However, we know there are many use cases for crypto which is not illegal and indeed, is a force for good. It appears naive to avoid investing in something or using it, simply because it can be used for illegal activities.

5. Another Bitcoin


A common response I have heard from wary investors is will Bitcoin be the Myspace to another crypto’s Facebook? It’s a good question and there are two key responses.

The first is network effect. Network effects have been called the business model of the Internet. Bitcoin has the largest network and the most number of users. At the time of writing, Bitcoin’s market cap and daily traded volume is roughly three times that of Ethereum, the second largest crypto. This is not to say that Bitcoin will be dominant for eternity. Network effects can be competed away. Myspace and Facebook is a well-known example. However, currently, Bitcoin is the dominant crypto and it will be extremely difficult for another “money-like crypto” to compete.

The second response is a portfolio approach. Investing in crypto is best done in a diversified portfolio. There is no reason why an investor cannot invest in both “Myspace” and “Facebook.” We don’t need to be exactly sure of which one will win, we don’t need to put all our eggs in one basket. With a technology this young, the best approach is to invest in a range of crypto projects which show enormous potential.

6. Crypto Has No Intrinsic Value

Another reason not to invest in crypto is because it has no intrinsic value. Crypto does not pay dividends, is not tied to cash flows, has no right to other assets.

This line of thinking requires a broader perspective. Let’s consider fiat currency. A $5 note has no intrinsic value, it’s simply a fancy piece of paper. The piece of paper is worth $5 because we all believe it’s worth $5. Some will argue that it’s backed by the government which issues the currency, but this doesn’t point to any intrinsic value. There have been plenty of cases where this backing has become worthless, like the current crisis in Venezuela.

Another example is gold. Gold has been the worldwide store of value for thousands of years, yet where is its intrinsic value? Gold is valuable because we all believe its valuable. In both cases of fiat currency and gold, neither has any intrinsic value. Yet they are valued because we are told to value them and we collectively believe in their value. We all believe they have value until we stop believing.

We could argue that this applies to any asset class — there is no such thing as intrinsic value. The value of all assets comes from the perception that other investors, often called the market, would be willing to pay for that asset. In some asset classes like equities and real estate, the models used to value the asset are well established and well known by market participants. The value of other assets, like commodities, currencies and crypto, are determined by the forces of supply and demand. Investors point to discounted cash flow models and net present values, but the only model that truly works to value an asset is working out what someone else is willing to pay for it. That’s where value comes from. In crypto, the asset class is young, scarce, not well understood, is a technological breakthrough and we believe the demand for these assets will increase in the future.

7. Wait and See

At the start of the article, I mentioned that some of the reasons for not investing in crypto are examples of failures in investor psychology. The “Wait and See” approach is the most serious of these failings. In most cases, it will only lead to worse investor outcomes.

Let’s analyse the scenarios for the Wait and See investor after crypto prices go up, go down or go sideways

  1. Crypto Prices Go Up — prices have gone up, therefore crypto is great and I’m now comfortable to invest, albeit at a higher entry point
  2. Crypto Prices Go Down — the investor gets scared, there must be something wrong with crypto, and decides not to invest
  3. Crypto Prices Go Sideways — crypto isn’t that impressive, what’s all the fuss about?

One of the biggest lessons from co-founding Apollo Capital is how I have observed countless investors, including sophisticated and professional investors, using price as a proxy for quality. At Apollo Capital, the interest we have received in investing in crypto has been directly correlated to the price of crypto. Prices goes up, everyone wants to invest. Prices go down, no one wants to. We all like to believe we are capable of going against the heard, being the contrarian investor who reaps the uncommon gains, but most of this is self-delusion. I haven’t heard one investor say “I’d like to invest, but I’d like to see prices drop to buy in cheaper.”

The approach we advise is the same as analysing any other asset class: it comes down to fundamentals. While crypto assets don’t have fundamental earnings, business plan or asset backing, the fundamentals in crypto is the technology. Investors need to understand or at least appreciate that crypto is a technological breakthrough, it is early, and that there could be huge demand for these assets in the future. Price action should have no impact on investors’ decision making.

Conclusion

Crypto is not for everyone. In the basket of alternative assets, it is an alternative asset. There are a number of sound reasons why investors should not invest in crypto. Yet, through my own personal journey in crypto, I learnt an important lesson. When I first heard of Bitcoin, I dismissed it almost instantly. It might have been fear of the unknown or because crypto is difficult to understand. It was easier for me to dismiss crypto and move on, than to keep an open mind and learn about it. Now, with the benefit of perfect hindsight, I realise I should have set aside a few hours and learnt about this fascinating new technology. It would not have cost much to invest a small percentage of my portfolio. At worst I would have lost my investment, shrugged it off and moved on. Instead, I was later than I would have liked to what is shaping up to be the biggest investment opportunity of my lifetime. I wonder whether the same applies to investors today who are yet to invest in crypto.

Tim Johnston is the Managing Director of Apollo Capital — Australia’s Premier Crypto Fund. The Apollo Capital Fund is a professionally managed portfolio of crypto assets, offering investors exposure to the fast growing crypto market. For more information, please head to apollocap.io