During the 8th edition of Blockchain Africa Conference 2022, Cointelegraph Editor-in-Chief Cristina Lucrezia Corner actually moderated a panel titled “Institutional Investing in Cryptocurrency: Increasing Returns and Improving Diversification.” Panellists Kalin Metodiev, co-founder and managing partner of Nexo, and Dimitrios Kavvatas, director of strategy at Amber Group, focused on the opportunities that institutional investors see in the blockchain and cryptocurrency space both in Africa and globally.
Nexo is a cryptocurrency borrowing and exchange platform that recently began offering cryptocurrency custody, lending products and services to institutional investors in partnership with Fidelity Investments’ cryptocurrency wing called Fidelity Digital Assets. Cryptocurrency trading firm Amber Group recently received a $200 million investment, tripling its valuation to $3 billion following a major investment by Singapore-based Temasek Holdings.
Both panellists gave their views on the current dynamics of institutional investment in the blockchain and cryptocurrency space and acknowledged the “exponential” growth of institutional adoption. Metodiev stated that institutional investors, however, may claim that the cryptocurrency market is “still too volatile”, making it difficult for them to determine the overall impact of cryptocurrency on other assets in the portfolio.
Kavvatas stated that “we can do more” than just adding cryptocurrencies as another asset class for large liquidity institutions. He added that while participation is growing, it is “not yet close to being meaningful.” Metodiyev also emphasized the importance of the African market and the “number of potential users that is growing daily” due to the “extremely” rapid adoption of blockchain technology on the continent.
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However, with mass adoption, regulation may come. Metodiyev said that while the free market should not be mixed with politics, some regulation should be expected: “It’s a pipe dream if we believe we’re living in a pink bubble” and expect millions of dollars to flow without any politics. or procedures. Kavvatas agreed that the inclusion of cryptocurrency in the standard regulatory framework is inevitable, despite the community’s hesitation on this matter.
Korner then asked what could be done to accelerate the responsible use of cryptocurrencies in line with the environmental, social and governance agenda set by the UN. Metodiev said that the more institutions commit to the goals of ESG, the more service providers can support these initiatives, but this starts with larger investments in blockchain technology.
Kavvatas spoke about Amber Group’s partnership with climate technology company Moss Earth and its program to tokenize the carbon offsets of Bitcoin transactions. He added that “blockchain companies are very well positioned to provide climate change solutions,” but there should be a “fair wind” from governments and regulators following them.
Another talking point included what institutions might be looking for in terms of revenue. Nexo’s Metodiev noted that institutions perceive return and risk differently than retail investors, highlighting that institutional interest is based on how opportunities are perceived. He said it might be more important for institutional investors to enter a space where they can place billions of dollars and earn a 7%-12% return year after year, rather than chasing 70%-80% returns.
The discussion concluded with Kawvatas expressing his admiration for the tokenomics and incentives associated with permissionless blockchains, which can enable the crypto community to overcome barriers to sustainable investment.