Crypto assets back in the news

‘Look at crypto over a two- to five-year horizon; ignore the short-term volatility,’ advocates Sean Sanders of Revix.

CIARAN RYAN: Crypto assets are back in the news, with Bitcoin trading above $11 000 or about R210 000, bringing back memories of the crazy days of 2017 and 2018. If you’ve ever wondered whether you should start learning something about cryptos and whether you should start adding some to your portfolio, help is at hand.

Revix is a South African company, backed by JSE-listed Sabvest, which has launched an investment platform aimed exclusively at cryptos. To take the guesswork out of the crypto investment, Revix has put together the crypto equivalent of unit trusts, which gives investors exposure to a spread of different crypto assets and, interestingly, a crypto investment called PaxGold, which is fully backed by physical gold. There’s also the Top 10 Bundle, which is invested in the top 10 cryptos as measured by market cap, and a Smart Bundle, which is invested in cryptos focusing on so-called ‘smart applications’. I’m Ciaran Ryan from Moneyweb, and to find out more about this we’re joined by Sean Sanders, the founder of Revix. First of all, Sean, welcome. How are you?

SEAN SANDERS: Hi, Ciaran. Very good, thanks. How are you doing?

CIARAN RYAN: Not bad. Can you kick off and tell us a little bit about your background and how you came to start Revix?

SEAN SANDERS: My background is in the asset management space. I worked at Sabvest who is our investor. I worked there for three years as a fixed-income and equity analyst. I then ventured to a venture-capital company based in Cape Town called Knife Capital, where I worked and pretty much focused on early-stage tech companies.

I was meeting a whole bunch of really passionate entrepreneurs over the course of a year or two, and I just had this itch. I needed to start something of my own and it just happened to coincide with early 2017, the time that crypto really started to gain mainstream media attention or gaining some credence with mainstream media. From that point on I was kind of sold down the crypto rabbit hole. From there it’s kind of just been a bit of history.

My business partner and I set out to build a business that made crypto investing a little bit more accessible because crypto investing has kind of turned into this big casino, where people are looking for short-term profits. This is a real investment asset class.

You are seeing the emergence of an entire investment asset class. It’s just something that you don’t generally see all that often.

You haven’t seen this for 20, 30 years and it’s this opportunity which we believe is a once-in-a-lifetime sort of opportunity. For the average Joe on the street, it’s highly rated exposure to this asset class, and we wanted to build something that allowed people to do exactly that. And that’s obviously what we’ve done now through Revix.

CIARAN RYAN: All right, Sean. So just explain what are the bundles that you offer?

SEAN SANDERS: We offer three different crypto bundles. We offer the Top 10 cryptocurrency bundle, and we offer two theme-based bundles. So just like you have the technology sector and the resources sector in the stock markets, you’ve got sort of sectors or themes within the crypto space, and we offer exposure to two crypto themes.

The one is the payments theme, so the likes of Bitcoin, Ripple, Litecoin, that are sort of looking to digitise payments or to evolve money. And these cryptocurrencies are kind of competing with each other to do that. We provide exposure to that theme.

We also provide exposure to the Smart Contract or cryptocurrencies. So these are the kinds of cryptocurrencies that are looking to kind of create the blockchain infrastructure that other decentralised applications can run on top of. These include the likes of Ethereum, Ethereum Classic, EOS, Neo [and] Cardano.

And what’s really nice about bundles is that they are rebalanced on a monthly basis. What this means is that every single month we’ll take a look at your bundle holdings and, if any of those holdings have fallen out – let’s say we are looking at the Top 10 – if any have fallen out of the top 10, and a new cryptocurrency increases in value, we obviously move that into the Top 10.

We do this every single month that you are invested with us. We see that as a big value-add because, over the long term, this is a very dynamic market. The crypto market changes a lot, and for us to be able to provide that value to our customers so that they can keep up to date with this evolving market, we see that as probably one of the biggest value-adds of our crypto bundles.

We also offer PaxGold, a tokenised gold product. And we offer a standalone investment in Bitcoin. I guess the big value-add that we have when it comes to not only Bitcoin but the other cryptocurrencies as well is that we’re able to connect our customers with a variety of different exchanges. The benefit of that is that at any given point in time we do give our customers the best prices in each of the underlying cryptocurrencies across any of those exchanges.

Another really neat feature of our bundles is that our customers own underlying cryptocurrencies. This is very different from a mutual fund or an ETF [exchange-traded fund] because, through a mutual fund or ETF, you invest in a fund that’s run by the fund manager. There’s a lot of additional administrative expenses. What our customers do is they are utilising a technology really called ‘direct indexing’. Direct indexing gives you exposure directly to the underlying cryptocurrencies.

So when you invest in our Top 10 Bundle, you actually own each of the top 10 cryptocurrencies. And when one of those cryptocurrencies is removed from the bundle and another one is added in, you actually own those underlying cryptocurrencies and the cryptocurrency that’s been removed is obviously removed. That is quite a unique development in the space and has a lot of advantages – both from a tax perspective and just sort of a tracking perspective. So, you’re able to perfectly track the market.

CIARAN RYAN: Okay, talk about the regulatory landscape for a minute here. I mean, there are a lot of schlenters that are coming into the space, right? So how do you persuade people that this is actually a safe thing?

SEAN SANDERS: Regulation is one of those areas where you just wish the regulators would move slightly faster, but you can understand why they are going slower. There’s a survey out that suggests that 10.7% of South African internet users invest in Bitcoin, which is a really high percentage.

What has happened in South Africa is that the IFWJ – the Intergovernmental Fintech Working Group, a [collaboration] of the Financial Services Conduct Authority, the South African Reserve Bank and Sars [South African Revenue Service] – they’ve come up with this position paper, and have had actually had several position papers over the years, to say, okay, right, we need to govern cryptocurrencies. We need to be able to look at the custody elements, how exactly are cryptocurrencies stored; we need to be able to look at the trading side of this. So are we going to be treating cryptocurrencies such as investment products and all the rest?

And they’ve come out with a few very interesting [views] and we wish that they would just move a bit faster because for us to get regulated means that it becomes a lot easier to build trust with customers. At the end of the day you are in the business of building long-term trust in this game, and there are a lot of scams out there. For us to be able to say, okay, right, crypto falls into this certain legal framework and if we have this legal licence that would be great.

But the long and the shorter of it really is that cryptocurrency is not deemed to be legal tender in South Africa just yet. It will be required. I mean, I guess every user of crypto will be required to go through the normal Fica process. And we adopted that when we started Revix. So, we’re kind of trading ahead of the curve, but it would be really welcomed to see the regulators step forward and to say, right, this is the final set of regulations. These are the requirements. And then, here is a certificate to say that you are regulated, and you’re able to offer your services.

So I guess it’s a bit of a waiting game at the moment. We hope that the regulators are able to release their final set of regulations before the end of the year. But at this point in time, it’s looking like early next year.

CIARAN RYAN: We’ve seen huge volatility in the crypto market. People who were holding Bitcoin back in 2017, I think, had to sit through a 70% draw-down in the value. Now, of course, it’s coming back up again. And I was looking at the Revix website just last night, and I saw that you’ve got the Smart Contract Bundle. Now you might just want to explain what that is, but that’s even more volatile than Bitcoin. Why is this such a volatile market?

SEAN SANDERS: The crypto market is predominantly retail investors, everyday individuals. There’s a lot of emotion that comes into crypto investing – it’s sort of treated as a short-term investment option. And that’s something at Revix that we are really trying to change. We’re saying, look at the longer-term investment opportunities, look at the two-to-five-year horizon, essentially even the 10-year horizon, and if this is an asset class or category that really grows in value. And that’s what we really do believe it’ll do.

Then you’re looking at the terms of hundreds, two, three hundred, 500%. If you’re looking at the short term, sure, you can make 10 or 20%, but there’s obviously the big risk that you could lose 10 or 20%. And I think it’s about being very honest. This is a highly volatile market. There are individuals who are using a lot of leverage on a lot of platforms, and that moves the market quite significantly.

And, just like the market can go up, just like it’s done this year over 50 or 60%, it can also pull back quite violently. And that’s what you would have experienced in 2017 or just entering 2018, with a big crypto pull-back. If you look out over the long term, Bitcoin back in 2012 was not even a hundred dollars, and you look at where it is now – and it’s R220 000-odd – it’s that long-term growth. And it’s not just in Bitcoin. I mean, if you look at the likes of Ethereum or Ripple, Litecoin, these other cryptocurrencies have grown in value thousands of times. It’s quite remarkable how much this whole asset class is growing, and there’s been a lot of debate around whether this is a bubble. It is not a bubble. We certainly believe that it’s not a bubble, and you’re going to see a lot of global applications start coming through in the crypto space. But that isn’t so obvious. And, when it is obvious, obviously it’s going to be a little too late.

So our position is to take a long-term view. Look at crypto over a two- to five-year horizon, ignore the short-term volatility. The 10 to 20% pullbacks would be a tiny kink in this longer-term chart. And, if you look back at some of the biggest pullbacks in not just Bitcoin or Ethereum’s history, but the entire crypto market, there are just kind of small bumps on this longer-term, upward-moving price chart. And that’s sort of the value-add that we see crypto can really add to a portfolio.

CIARAN RYAN: People have heard about smart contracts – or maybe they haven’t. This is something to get your mind around, that you’re actually investing in an asset which is also a contract. In other words, it has some utility. It has some value. Just briefly explain what that is. I mean, we’re talking about crypto coins like Ethereum – why is that a smart contract?

SEAN SANDERS: You had kind of Bitcoin that came about, which is the first generation in the crypto space. And it was really only good at moving value. So you needed something that could do a bit more, and that’s where the likes of Ethereum and some of these newer-generation cryptocurrencies came in. So a Smart Contract kind of has logic built into it. If you think about it, what can the money be used for today? I’m talking about physical money, not even digital money.

Physical money can be used to be for paying for goods and services, and that has served a lot of utility over time, it has helped a lot of people out. But if you now look at the likes of Ethereum and Smart Contracts, you can digitise money, which means that you can say, okay, this money then is a little – call it ‘smart’. This money can do things based on certain pre-set criteria. An example of this is to say, okay, if you’re buying a car from me, and I’m having this car delivered to your house, only release the funds into this individual’s bank account when the car is actually delivered, and this individual has signed for it. It sounds quite basic, but that currently involves quite a few different banks and middlemen, and with the likes of Ethereum and smart contracts and smart-contract-oriented cryptocurrencies, which include the likes of EOS, Tron, Kadena or these other cryptocurrencies, that can all be automated. And if you think about all the other processes which occur with middlemen – insurance, lending, mortgages, the list goes on; they all require middlemen.

Now imagine you could have a peer-to-peer metric. This has really been, I guess, part of the success story of 2020 has been around this DeFi space, or this decentralised finance space, where you see the emergence of a lot of these decentralised technologies that are making finance a lot more peer-to-peer and a lot more automated.

So, in a nutshell, smart contracts are coming, and central banks have seen smart contracts and they’ve seen the power of smart contracts. And that’s why a lot of central banks are coming out wanting to create their own digital currency. Why? Because there can be conditions attached to it. Maybe that digital currency can only be used within a country, or maybe that digital currency can be utilised for specific purposes. And I think that’s now the evolution of money that’s coming about, and we are assuming the crypto space is very excited.

CIARAN RYAN: You’ve got the Top 10 Bundle, which has invested in the top 10 cryptocurrencies, so people who don’t know about this space don’t have to guess, and they don’t have to make any selections there themselves. You’ve also got the Smart Contract Bundle and you’ve got PaxGold for people who want to invest in gold. What’s the future for the next six, 12 months?

SEAN SANDERS: What we are really focused on is making crypto investing as easy and effortless as possible. So now our goal, really, with our Top 10 Bundle and any of our bundles, or any of our products that you want to invest in, is to be able to make investing easier and to allow people who want exposure to a certain asset class, just something that’s accessible as well – because you can invest with us for as little as R500.

So, looking forward, we are wanting to extend the same approach that we’ve used so far into a more traditional investment world. And we’re going to do that by offering a variety of different theme-based investments.

So, think of AI, biotech, 5G technology, artificial nukes – and the list goes on – these are all really interesting areas or sectors that people would like to invest in, and they just don’t know how. We would be able to offer these as investment products that are as easy to get exposure to as our Top 10 Bundle or PaxGold or Bitcoin. That’s really the long and the short of it. That’s sort of our evolution of this business. We want to get people involved in the areas that they believe in, and we believe that that’s a more powerful way for people to be able to allocate their funds to areas that not only they believe in, but that potentially can have a really big impact on the future of humanity.

CIARAN RYAN: A very exciting future that you’re postulating there, Sean. Thanks very much for joining us and we wish you the very best of luck with Revix. That was Sean Saunders, who is the founder and CEO of Revix.

About Revix

Revix brings simplicity, trust and great customer service to investing. Its easy-to-use online platform enables anyone to securely own the world’s top investments in just a few clicks.

Revix guides new clients, through the sign-up process, to their first deposit and first investment. Once set up, most customers manage their own portfolio, but can access support from the Revix team at any time. 

For more information, visit Revix.

This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. You should not invest more than you can afford to lose, and before investing please take into consideration your level of experience and investment objectives, and seek independent financial advice if necessary. 

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Thanks for enlightening us a little more into this cryptic realm guys.

So exciting that you can link these crypto assets to virtually any value-added product and service and restrict middlemen to a saner share of margins, depending on the actual value they have to add.

Entrenching service levels and values required prior to delivery could prove extremely useful- especially in the emerging market/African/S African context. Beautiful actually!

End of comments.

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