The Cryptocurrency market has minted many millionaires and also scared many investors who are trying to wrap their heads around the complexities around the booming industry.

Just over the past month, Ethereum and other cryptocurrencies have dropped over 50% within the last month attributed to leveraged positions in cryptocurrencies, China’s digital-asset policy, as well as Elon Musk’s comments about Bitcoin’s negative environment impact.

This persistent volatility does not reflect the price movement of any traditional asset class. Is there a way to position your cryptocurrencies investments in a sound, rational manner against your other investments? Should we sell on high, buy on low or just hold all the way?

In this session, join KK, a regular Singaporean, who became a crypto-millionaire,  as he shares his thoughts with Sam Rhee, Endowus Chairman and Chief Investment officer on the following topics:

  1. How KK got started with cryptocurrencies in 2020
  2. How KK invests the rest of his money beside cryptocurrencies
  3. Sam’s views on the importance of a diversification-first, speculation-later strategy
  4. Sam’s views on the importance of research and not following the herd in cryptocurrencies and investing
  5. Sam’s views of having exposure in cryptocurrencies

Timestamps:

0:00 Introduction

4:58 Is Crypto a financial asset?

11:58 Correlation between Crypto and other asset classes

15:17 KK’s investment journey

19:53 KK’s experience with Crypto

26:40 What are DeFi apps and how do they operate on the Ethereum blockchain

42:22 Future outlooks on Crypto and what it means for the market

48:42 Insights on luck and due diligence with Crypto

55:03 KK’s advice and insights on getting started with investing in Crypto

1:01:45 KK’s views on regulation with Crypto and govcoins

1:06:09 QnA: Could the advice of “time in the market vs. timing the market” be applied to the Crypto market?

1:08:12 Sam’s journey and experience with Crypto

1:12:30 QnA: Will environmental and sustainability issues become a problem for Bitcoin?

1:15:21 QnA: Banks deploy deposits to pay deposit interests; how do coins generate interest?

1:17:05 QnA: Should Crypto be treated more like a form of currency rather than a form of investment? Do you think crypto ETF unit trusts can provide protection against inflation?

Excerpts from the Webinar

Correlation between Crypto and other asset classes (11:58)

Sam: An argument people tend to use when discussing crypto being a financial asset is how effective it is in being a non-correlated asset class. There is high correlation between different cryptocurrencies, however. if you compare it to other asset classes (eg. gold or S&P 500) the correlation changes as time progresses. For example, the correlation between Ethereum and the S&P 500 year to date is at 73%, but its correlation to gold is in the negative.

It is important to remember that crypto is not one uniform space. because of the recent collapse, it has unfortunately become very difficult to differentiate between the various currencies. The real tragedy is that there is a huge volume of different utility coins and useful productive assets that exist in the market but they have moved up and down all together. I think once we are able to differentiate between the wheat and the chaff it would help the crypto space greatly. Additionally, once the currencies stop moving all together, it will validate the fact that crypto is not a correlated asset in and of itself but also with other traditional assets.

KK’s advice and insights on getting started with investing in Crypto (55:03)

KK: Although I have a favorable and long-term opinion for the crypto industry, I think people should take a longer term view if they are looking to invest now. My advice is to do all of your homework and then size up the proportion of your investment according to the level of research you have done.

In my experience, I allocated a lot of my investments into the crypto space because I had felt that I did my due diligence. Further, when I started investing in crypto the prices were cheaper during that time. Although, if you look at it in the grand scheme of things I feel that it will go up but that is without saying you have to expect price volatility.

QnA: Will environmental and sustainability issues become a problem for Bitcoin? (1:12:30)

KK: In terms of the ESG narrative for bitcoin, it is tough to give my opinion on. If you look at the statistics that people have produced, most crypto miners around the world are situated in places that use natural energy sources. The part that critics are mainly focusing on are the miners in China that use coal fire to power their mines. Nonetheless, that stigma will stick for a while and it will be up to the industry to disapprove of it and promote green energy as time goes by.

Sam: It is a concern, especially in the current narrative of environmental issues and which is why I think it doesn’t sit well with a lot of people. The demographics of people who are pro crypto and blockchain is kind of overlapped with the pro ESG camp and it will be interesting to see where this issue will go.

QnA: Banks deploy deposits to pay deposit interests; how do coins generate interest? (1:15:21)

KK: In a bear market, I would personally just focus on generating yield on my tokens and as for how that yield is generated it really depends on what and how you are investing. For example, exchanges can follow a similar model as to how traditional banks do it -- the bank receives deposits and then lends it out at a higher interest rate and as a result, the borrowing rate would cover your deposit rate. Another way of doing it is that some tokens act like “pseudo equities”, whereby they generate cash flows that you can get the yield from and these cash flows are generated from the use of the platform.

What we are currently seeing is that a lot of crypto projects are giving out tokens for free, which is a marketing gimmick to attract customers. However, in a bear market, giving tokens for free is not sustainable. What you should focus on is on the real cash flows from actual yields rather than a marketing kind of activity.


About the Speakers

Samuel Rhee

As the Chief Investment Officer & Chairman of Endowus, Sam is responsible for the company’s asset allocation and investment selection. He heads the Investment Committee and ensures holistic portfolios for every investor. Sam has over 27 years of investment experience, managing investment portfolios in excess of US$20 billion dollars while working with the largest financial institutions in the world. He is the former Chief Executive Officer and Chief Investment Officer at Morgan Stanley Investment Management in Asia.

KK, Blogger, Risk N Returns

KK started investing in 2013 and has invested in many traditional investment products such as REITs, single stocks and funds. He started his foray in the cryptocurrency space in 2020 and managed to make his first million in the process.

He is an accountant by training and was previously an internal auditor in a global hospitality firm. He is currently doing his masters full time at a local university.

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