DAA Manager Insights: Victor Lai
With the first batch of DAA managers on the ICONOMI platform, users can choose from a variety of different DAAs. To help them with the decision, we are publishing a series of short interviews with DAA Managers. First in the list is Victor Lai:
Victor, you are a CFA Charterholder, which in the old investment world means quite a bit. How are you using this knowledge in the crypto world?
My previous experience working in investment banking and at various hedge funds has been a great asset in analyzing various blockchain projects that span many different industries. Each project is unique in itself, but the process of conducting rigorous due diligence, assessing the fundamentals, and taking an objective view on a project’s investment potential or value proposition is the same.
My educational background and working experience in business and investing has enabled us to make some very successful calls on our website CrushCrypto.com, which currently has reports on over 45 blockchain projects. As of October 11, 2017, projects that received a positive rating generated a return of 371%, compared to the -13% return generated by projects that received a negative rating.
What is your view on crypto getting viewed and approved as a new asset class? Are we waiting for a regulatory framework that will make institutions more confident to jump into this world?
Because of the unique risk-reward profile and diversification benefits that cryptocurrency provides, I believe that within 5–10 years, cryptocurrencies will grow to a point where they will become a suitable asset class for most investment portfolios, similar to commodities or foreign currency.
Some in the old finance world may reject cryptocurrencies, either because they do not fully understand them or because they could potentially replace their existing businesses. Others will embrace them and view them as a new opportunity.
When a technology has the potential to disrupt an industry, it is often faced with adversity and reluctance to adopt. But as cryptocurrencies are becoming more developed and accepted, I believe those who reject or ignore them will miss out and fall behind.
Regulation will always be an issue for cryptocurrencies because they offer a new way to obtain financing and even change how people think about money. However, because of the decentralized nature of cryptocurrency, we believe it is very difficult to regulate it effectively if there is demand for it.
We are seeing many coins underperform ETH/BTC. This makes it quite a challenge to pick the right coin. What are the three most important criteria you check when looking at coins?
It is certainly not easy to pick coins or tokens that will outperform. However, since the market capitalization of bitcoin and ether is so large now, it will be increasingly more difficult for them to appreciate at the same rate that they have been so far. Therefore, we believe picking the right coin can still be a winning strategy.
Our three most important criteria in analyzing a cryptocurrency are adoption, valuation, and market awareness. Ideally, we want to find coins/tokens that are expected to have wide adoption, are trading at a reasonable valuation, and have enough publicity that market participants are aware of their developments.
The average Joe and crypto. Even though there are many articles about a potential bubble in crypto, what is your estimation of the average Joe’s involvement in crypto assets.
With any technology that has the potential to change the way we live, bubbles are bound to occur, and prices sometimes get ahead of the fundamentals. Bitcoin has experienced several bubbles already — there have been several instances where Bitcoin prices dropped by more than 70% in a short period of time.
While bubbles may arise and burst from time to time, we believe cryptocurrencies as a whole will continue to move forward. The entire market capitalization for cryptocurrencies is around $155 billion, which is minuscule compared to other asset classes.
Cryptocurrencies have a lot of potential but are still far from becoming mainstream. At the moment, it is not easy to purchase, trade, or securely store cryptocurrencies, and this has been keeping most people away from participating in this asset class.