The rise of cryptocurrency has often been compared to the real estate and dot com bubble. Last year alone has seen thousands of entrepreneurs and traders turn millionaires because of the crypto boom. The meteoric rise of crypto and blockchain into a trillion-dollar sector has caused many countries to either ban it outright, or have serious discussions regarding the regulation of digital assets. As a lot of wealth is migrating from Baby Boomers to Millennials, they think about money differently. They not only want a yield in an economy that’s inflating but are also looking for entertainment from finance. The Gamestop Saga is an indication that there is activism and entertainment with finance, which is a completely new concept.
When you are talking to an aggressive and enterprising crypto entrepreneur whose maiden venture is valued at $8 billion and has scaled considerably over four years, it’s interesting to start the conversation with the subject of a bubble. Raghu Yarlagadda, co-founder and CEO of FalconX, a cryptocurrency brokerage and digital asset trading platform for institutional investors, takes the bull by the horns.
“The future is already here. It’s just not evenly distributed,” he says, alluding to a quote attributed to influential American speculative fiction writer William Gibson. Crypto, too, has a similar story, reckons Yarlagadda, whose San Francisco-based venture recently scooped up $150 million in a Series D round and more than doubled its valuation to $8 billion in just 10 months. Edited excerpts:
Why regulation in digital assets is crucial
In order to think of mass adoption, regulation is necessary, and without regulation, it’s impossible. As with the internet, blockchain is similar to what happened. It is on a similar path. Initially, it was an untamed ‘beast’, not very regulated, and fostered enormous innovation. As it passed the tipping point, many institutions wanted it to be regulated. The same is true for crypto. They are looking into this very seriously, and they want to regulate it. Once that happens, the ‘beast’ will change. The land of cowboys will no longer exist as it did three years ago. That’s a good thing.
Market correction and business ‘fundamentals’
As the market goes through a corrective phase, many investors are now looking for value. What is the value? It’s been a constant throughout business history: You have to have revenues, and you have to have profits. If you don’t have profits, it’s very hard to justify a massive valuation.
Three ingredients have been important throughout history: sound business fundamentals, unit economics, and growth coupled with profits. At the end of the day, when the market gets into a risk-off or value-hunt mode, the companies generating good revenues and profits will leapfrog to become bigger and better. The market will consolidate, and the winners will get bigger and better.
Flurry of unicorns across the globe
There has been a huge run of unicorns all over the world, and in India as well. The reason for this is twofold. The first is that some of these companies might not have solid business fundamentals. They probably went up with the tide. Many of these companies are actually disrupting traditional business models. I am excited about financial inclusion in India. India is statistically ahead of China, Germany, and South Africa in this area. Take UPI, for example.
It’s actually much more advanced than many developed countries. For the first time, the market chain is shifting away from traditional incumbents toward some of the newer tech companies. Yes, a rising tide lifted all boats, and some boats were not built robustly and will inevitably have to be corrected. Despite this, I believe the number is lower than what people would expect in the so-called winter months, primarily due to how millennials are interacting with financial services, how technology is making things online, and the delivery ecosystem.
Venture money pouring into crypto
When billions of venture capital are invested into crypto technologies and digital assets, one of the first things they do is educate the market. For the first time in the US, there was a sizeable number of crypto ads during the Super Bowl, the most expensive real estate for advertisements. This creates an opportunity for market education. It’s probably not necessary to understand this at the user-centric level whether it’s an exchange or brokerage. I believe it’s more important to educate people on what digital assets are, and what they’re useful for.
Why India is well-placed to take a lead in crypto
The combination of an English-speaking population, a large democracy conducive to digital assets, a lack of bans on these assets, as well as a voracious appetite for financial inclusion makes India a good place to be. With the three intersecting forces of the vectors, India can achieve something as profound as what it did with outsourcing ten or twenty years ago. India can build an international cryptographic system. I hope we take advantage of this opportunity to build a global system.
Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
