Web3 and cryptocurrencies represent real innovation and will transform the global economy, but pension funds, endowments, and other institutions probably won’t be able to profit from the sector.
That’s the view of hedge fund manager Jordi Visser, who is president and CIO of Weiss Multi-Strategy Advisers. He is adamant that the downfall of FTX is a good thing in the long run, primarily because it has provided a visceral warning to serious investors.
Although the focus has been on the failure of investors to do robust diligence on crypto exchange FTX, Visser says that Web3 companies simply go up too fast — and then cascade down — for investors to make any money. It’s a lesson that many investors should have learned from technology companies in general. Uber, for example, is below the price at which it went public. Those who made money in the company were the early-stage investors who were able to get out at the IPO price, he said.
Crypto presents obstacles that are even more difficult to get around. “Investing in Web3 and thinking you can pick companies? It’s not going to happen. It’s a different investing world,” Visser said. The narrow window between early-stage and late-stage crypto companies is the result of intense competition.
In 2013, there were seven crypto currencies. Now there are 21,000, with 9,300 active ones, according to research from Weiss. “Think of them as companies. Their tokens are their share price, essentially,” Visser said. “We’ve had an expansion, but they’re all just competing with each other,” he added.
Visser believes that investors should opt to put their money into Bitcoin and Ethereum, which will continue to dominate. “These other ones will be very small, hundreds of thousands of them. And there’s no way to invest in them other than to put money [into] the biggest cryptocurrencies.” He added that the question of how early-stage investments in crypto can be monetized “will paralyze the way people invest in this space.”