Ether Capital CEO explains why crypto volatility hasn't been a reason for believers to give up hope
For many investors in crypto assets, the recent turbulence and price decreases in the space certainly might have been a cause for concern. But according to Brian Mosoff, CEO of Ether Capital, it hasn’t been a reason for believers to give up on the asset class.
“My interaction with newer investors who may not be used to the volatility is that they may not add to their position, but they don't give up hope or belief that the asset class is here to stay,” Mosoff said in a recent interview with Wealth Professional. “What they don't know is how to price the asset, when it's appropriate for them to wade in, and the size of the check that they should have.”
When crypto investors come to the realization that the asset is falling, it creates short-term pressure on investors. But more importantly, Mosoff says, it offers a lesson for investors as well as a chance to reflect: did they want the asset because of its fundamental thesis and the promise behind their invention, or were they just looking at a momentum trade?
“During high-volatility or turbulent periods, investors have an opportunity to reassess their portfolio as a whole, and revisit the theses they had on why they allocated to certain assets and positions,” he says. “When it comes to crypto, it may be an opportunity to zoom out and say ‘is the size of the exposure here appropriate to my stomach for volatility and what I’m trying to achieve?’”
Crypto investing has tended to be more appealing to younger investors, who are more comfortable navigating the technical requirements to get exposure to the asset class. Beyond that, younger investors also tend to be more comfortable with volatility and have a longer time horizon; those that believe in crypto’s longevity are more apt to wait out a bear market that could last two, five, or even 10 years, as long as it stays within the thresholds of what they want to achieve financially.
As for investors with shorter time preferences, Mosoff says turbulent times are more likely to dial down their exposure. They may decide that they were too leveraged into the asset class, and the nascency of the policy and regulation around how these assets will exist in appropriate frameworks in whatever jurisdiction might give them pause.
“Within the crypto investing slice, investors may also take the opportunity to zoom into which specific assets they’ve chosen to hold,” he adds. “Within crypto, you’ll see blue chips in Bitcoin and Ether, and then there are highly speculative tokens, Defi, and flavour-of-the-week NFTs. So they can take a breath and consider that they still want crypto exposure, but they may want to play it differently and more appropriately for the long term.”
For Mosoff’s money, Bitcoin and Ether are the most likely to remain as blue chips at the top of the board for the next two to 10 years. For Bitcoin, he points to the development of the Lightning Network, which promises to decrease bitcoin transaction times by orders of magnitude. That, along with other developments and recent geopolitical events, has led some investors to declare that the thesis of bitcoin is stronger than it’s ever been.
“Part of the irony is people are so focused on the price, and not focusing on the thesis of what it set out to do, which is to create an untethered asset that is a bearer asset outside of the control of a government or central banks,” Mosoff says. “That is literally where we're at globally as a conversation, and that's the value proposition here.”
As for Ethereum, he says upgrading to a proof-of-stake model instead of proof-of-work creates the opportunity to transition from being an unproductive commodity to a yield-generating instrument. That means in a few months, ether investors are able to potentially take their ether and generate a 5% or 6% return, based on a variety of factors including network activity, transaction fees, and the number of other people validating the stake.
“The wider investor community, the financial advisors and institutions haven't yet done that homework to see that there's some really special things happening not just in Bitcoin, but Ethereum as well,” Mosoff says. “And it may be a counter-argument that instead of taking money off the table, now may be the time to start building a position.”
Within Canada’s borders, important developments relating to the broader crypto industry are also afoot. In its throne speech last month, Alberta’s UCP government mentioned future legislation aimed at cementing its reputation as a “modern electricity powerhouse and a magnet for investment in emerging technology like data storage and cryptocurrency.” Already, the province has become an attractive destination for cryptocurrency miners, and is turning into a haven for other crypto-related businesses.
More immediately, a diverse group of Canadian companies focused on Web3 technologies – which includes blockchain and cryptocurrency platforms – have come together to form the Canadian Web3 Council.
The stated priority of the non-profit trade association, which includes Ether Capital, Wealthsimple, and Dapper Labs among its founding members, is to advocate for a national strategy for cryptocurrency and digital assets. Citing a need to ensure Canada and its citizens benefit from the emerging asset class, the group is urging all levels of government to coordinate and convene industry and experts in order to “build a robust, equitable, and sustainable national strategy for cryptocurrency and digital assets.”
“The Canadian crypto ecosystem is poised to flourish and position homegrown Canadian companies as global leaders,” Mosoff said in a statement announcing the council’s launch. “But to make this a reality, Web3 industry participants, government and regulators need to work together to create a framework for responsible innovation that sets Canadian businesses and investors up for success.”
