During the Eighth Blockchain Africa Conference 2022, Editor-in-Chief Christina Lucrezia Corner moderated a virtual panel entitled “Institutional Investment in Cryptocurrencies: Increasing Yields and Improving Diversification.” Lecturers Kalin Mitodiev, co-founder and CEO of Nexo, and Demetrius Kavvatas, Director of Strategy at Amber Group, focused on the opportunities that institutional investors see in blockchain and crypto spaces in Africa and globally.
Nexo is a cryptocurrency exchange and lending platform that recently began offering cryptocurrency repositories, lending of products and services to institutional investors in partnership with crypto arm Fidelity Investments called Fidelity Digital Assets. Cryptocurrency company Amber Group recently received a $ 200 million investment that tripled in value to $ 3 billion after a major investment by Singapore-based Temasek Holdings.
Both speakers spoke about the current dynamics of institutional investment in the blockchain and crypto space, and acknowledged the “exponential” growth of institutional adaptation. Metodiev stated that institutional investors may argue that the cryptocurrency market “remains very volatile”, which means that it is very difficult to determine the overall effect of cryptocurrencies relative to 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 although participation is increasing, it is “not yet close to being meaningful”. Metodiyev also stressed the importance of the African market and the “number of potential users growing every day” due to the “extremely rapid” adoption of blockchain technology on the continent.
Related: Crypto users in Africa grow 2500% in 2021: Report
But with mass adoption, regulation can come. Although the free market should not be confused with politics, Mitodiev said, some regulation should be expected: “It is a dream if we think we live in a pink bubble” and expect millions of dollars to flow without any politics. or procedures. Kavvatas agreed that the inclusion of cryptocurrency in standard regulations was inevitable, despite society’s reluctance in this matter.
Korner then asked what could be done to accelerate the responsible use of cryptocurrencies in line with the UN’s environment, social and governance agenda. Metodiyev said that the more vocal organizations are about their commitment to the goals of the ESG, the more service providers can support these initiatives, but this starts with larger investments in blockchain technology.
Kavvatas talked about Amber Group’s partnership with climate technology company Moss Earth and its program to tokenize carbon offsets in bitcoin transactions. He added that “blockchain companies are very well positioned to offer solutions to climate change”, but that there must be a “fair wind” from governments and regulators to follow suit.
Another topic of conversation is what organizations can be looking for when it comes to revenue. Metodiev at Nexo notes that institutions view returns and risk differently than individual investors, and emphasizes that institutional interest depends on how opportunities are perceived. He said it may be more important for institutional investors to enter an area where they can invest billions of dollars and consistently earn 7-12% returns year after year, instead of aiming for 70-80% returns.
The discussion ended with Kavvatas expressing his admiration for tokens and incentives linked to unauthorized blockchains, which could enable the crypto community to overcome barriers to sustainable investment.