Despite some 'Ponzi schemes', this fundie thinks crypto will bounce back stronger

Given we’re in a bear market right now, what about the Web3 share of the fund?

Obviously, it’s going down, and this is why the allocation is small. But we’re figuring things out over a five to seven year timeframe, and while the current downdraft is putting some drag on the portfolio, to me, it’s actually pretty good in terms of cleaning up a lot of the bad stuff in the space.

Bitcoin and other cryptocurrencies had a tough six months.Credit:AP

And what regulators are trying to implement, within a clear framework and legislation, is to avoid this. What happened today is a rerun of what happened in traditional financial services over the years.

That’s very clear when you look at some of the influences in the Web3 space. It doesn’t cease to amaze me that people are taking on so much influence in a space that is already growing so fast. Why would you want to do that?

Yeah, when you look at things like the Celsius drawdown pause and the interest rates they offer, I mean, do people really think that it could go on forever?

Appropriate. And people don’t realize the regulatory burden on funds like ours, we constantly run liquidity tests with our funds – it’s a very thorough process. So once you see this incredibly high yielding product, you have to ask how is it sustainable? How are they produced? What is the economic proposition?

Heath Behncke of Holon welcomes further regulation in the crypto space.Credit:Oscar Colman

And when you start looking at it more and more, it looks like a Ponzi scheme. The way it’s actually structured, there’s nothing real there. It’s no surprise that we have a downturn and all the liquidity is sucked out of the market. These are reasonable things that someone with experience in financial services would avoid from a risk management perspective.

Do you see the current bear market as a bit like the dot-com crash? In the sense that the surviving companies will become more durable and higher quality companies?

Very. You see from time to time that well-positioned networks like Bitcoin and Ethereum and the companies that build around them are the ones that last.

I think the main thing that’s going to happen, this is really going to make legislators globally realize that they need to put in place some clear laws and clear regulations that bring risk management into the fray. I think that’s the single biggest thing I see as a clear result of this cycle.

Utility in technology is what we are interested in and, in my opinion, will endure through time.

Holon portfolio manager Heath Behncke

When we look at legislation, we don’t want to just copy what we have in financial services today where we are heavily regulated with huge capital, huge amounts of compliance. That’s not a model we really want to drop with Web3, we need to embrace the technology and embrace the solutions it can offer.

Some say this bear market could be extended mainly due to the broader macroeconomic environment. If it lasts a few years, or maybe it doesn’t rebound as much as expected, what does that mean for your investment?

There’s bound to be some concern about that, but for me, when I sit down and look at the situation, utility in technology is what we’re interested in and what, I think, will last the whole time.

Load

Sometimes you sit and think ‘oh my God, how long is this going to take’, but on the other hand, we’re seeing all the good moves from legislators globally. Plus, it’s not like the ICO craze of 2018, the money going into the space is real. Back then, there was still the possibility that all of this could just disappear, but now people are really realizing the value proposition.

It’s like lime and cheese. Now you can see the government is really coming up with consumer protection and investor protection to really enable everything we’ve learned from the current financial system and embrace the Web3 space to really help the promise of technology come to life.

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