SIMON BROWN: I’m chatting now with Sean Sanders, CEO and founder of Revix. Sean, I appreciate the early morning crypto insight as always.
There are two points. The first one, Bitcoin was always going to be an inflation hedge, and we’ve seen inflation surging globally. Bitcoin is kind of not acting like that. What we have actually seen is cryptos come down with other markets in terms of sort of general fears around inflation, around the Ukraine and all the worries in the world. In many ways this is I suppose saying that it’s not an inflation hedge, but that crypto is becoming a sort of a standard asset for the investing world.
SEAN SANDERS: Morning, Simon. Thanks very much for having me on again. Yes, this is the start of this asset class. There’s no correlation really to gold. It’s quite weird. A few months ago we were talking about crypto and in particular Bitcoin’s very high correlation to gold, and then the correlation with tech stocks. I suppose crypto’s actually being treated as a bit more of a risk-off asset over the last while, and it has kind of come down with the entire market. Very few assets have increased. Gold and some government bonds have done well over the last weeks, but it seems that the inflation discussion has now shifted to this geopolitical discussion around Russia and Ukraine. The markets seem to be just moving along with developments that occur on that front.
But I wouldn’t write off crypto just yet as an inflation hedge, because I think, if you look back in history and you look at high inflationary periods, we’ve never actually had cryptocurrency exist through one of those. It’s sort of [about] how the asset class performs during the entire period, not just at the beginning, and we are really just at the beginning of this inflationary period.
SIMON BROWN: That’s actually a great point. We are months into it, and if we go back to the US and their last high inflationary period, it lasted for the better part of a decade. So we are all kind of assuming that inflation will be tamed by, I don’t know, June. It might not be. We might be talking about this for years. I like your point. It’s the making of an asset clause.
How have the bundles been doing? You’ve a couple of bundles on your platform. How have they performed in this market where certainly we always look at and talk around Bitcoin. That is the big one in the room – although, as you’ve mentioned, its relevance is declining relative to the others. How have the bundles been doing?
SEAN SANDERS: I think it’s exactly that. The Bitcoin dominance index, the total percentage of the crypto market that Bitcoin makes up, has declined over the last several years. It went from 75% over about two-and-a-half years ago … down to roughly around 40%, and we see that trend continuing. So with that trend continuing the bundles that we offer are outperforming Bitcoin.
On a year-to-date basis our top 10 bundle, which owns the top 10 largest cryptocurrencies, is up roughly one-third higher than Bitcoin. I actually think it’s moderately down over the last year, with Bitcoin also slightly down.
But it’s been an interesting period, I suppose, looking at this crypto asset class, even when you zoom out. The interesting thing is you don’t look over a one-year horizon and go, okay, right, this is up or down a couple of percent. When you zoom out over that three- or five-year horizon – we launched these bundles back in 2017 – that’s when things go like, wow.
You are looking at your returns 4X or 5X your money. That’s, I think, the opportunity when you’re looking at crypto over say the next five or 10 years because, if this is an asset class – and don’t get me wrong, this is still a very high-risk asset class – when you look out over a much longer-term horizon, the industries that this asset class is looking to disrupt (you’re looking at fintech, you’re looking at banking, mobile payments, there’s so much going on) it’s that sort of opportunity that really excites a lot of people. Because it’s not just a 1X or 2X return; you’re looking at multiples of your money. It’s like investing in an early-stage business, where you’ve got this sort of 10X, 20X return opportunity.
SIMON BROWN: Your bundles, as I recall, are equal weight. In other words, Bitcoin in that top 10 will be 10% rather than 40%, which means your smaller ones are also in many cases upweighted; they’re all sort of equal and then rebalanced on a regular basis.
SEAN SANDERS: That’s correct. So if you go and back-test a performance of, let’s say a market-weighted bundle where you would have 40% in Bitcoin, 10%-odd in Ethereum, and so on, the return comparison doesn’t even exist. I mean, there’s roughly around a 75% annualised excess return on an equally-weighted bundle. You’ll see a lot of providers in the market offer market-weighted bundles, and I’m just [thinking] why don’t you just go out and buy Bitcoin, Ethereum and maybe Cardano, because then essentially you are owning 75% of what you otherwise would be buying in that bundle.
So that equal weighting is sort of our big value-add, because every month we’ll rebalance the bundle to make sure that you’re owning 10% of each of the top 10 largest cryptocurrencies, and with the other bundles, we take an equally weighted approach as well.
SIMON BROWN: You’re bringing a new altcoin to the Revix platform, Luna – not lunar as in the moon. Tell us a bit about this one. I’d never heard of Luna and I had to do some Googling of it.
SEAN SANDERS: But that’s keeping up with the trend, right? Every time I come on this show there’s a new cryptocurrency. So this one’s just for you, Simon. The Luna cryptocurrency is a cryptocurrency that’s launched on the Terra network. What this network is looking to do is … It’s a network that has a smart contract functionality, so similar to Ethereum, Polkadot, Solana, Cardano. What this network’s really looking at doing is enabling mobile payments, I suppose remittances more broadly. I’m not going to get into the detail too much, but the Terra network allows you to create stablecoins. You may have heard of, say, USDC, which we offer on our platform as well [as] USDT.
Really this network focuses on creating stablecoins that are sort of linked to real-world assets – dollars, gold and others – and enable you to make payments across the globe.
So [they are] really solving the big issues that we have right now [where] making an international payment is expensive, it’s slow. You can only make payments during week (days) instead of over weekends and all the rest. So this network’s really looking at disrupting that. The adoption’s been quite remarkable. We actually have to look back at sort of the last 12 months’ performance, and it’s the top-performing large-cap cryptocurrency. In 2021 it performed remarkably, even saying this percentage is kind of mind-blowing.
It returned 14 100% in 2021.
It has come down a little bit in 2022, but I think this is really a big industry that is looking to disrupt. Currently it has a market cap of roughly around $22 billion, equivalent to the likes of MTN if you had to look at a South African stock. So it’s a big project. This is a really big opportunity.
SIMON BROWN: Yes, that global payment. I know the banks call their network Swift, but it is truthfully anything but swift.
We’ll leave that there. Sean Sanders is CEO of Revix, which is launching Luna, on the Terra network, which is again more that smart contract. I like this. This is linked to those stablecoins.
Sean, appreciate as always the early morning.