Institutional interest in cryptocurrencies is increasing as the space continues to mature. A survey published on December 8 by European investment manager Nickel Digital Asset Management found that 85% of institutional investors and wealth managers have teams dedicated to reviewing cryptocurrencies and digital assets. The study noted that surveyed investors manage about $ 108.4 billion in assets. The London-based firm also released a report in September this year showing that 62% of global institutional investors with zero exposure to cryptocurrencies expect to make their first cryptocurrency investments within the next year.
It is also notable that Wall Street veterans are beginning to enter the crypto industry. Most recently, Matt Zhang, a former business executive at global bank Citi, launched a new venture fund dedicated entirely to new cryptocurrencies and blockchain. Known as “Hivemind Capital Partners,” Zhang previously noted in a Cointelegraph article that the $ 1.5 billion multi-strategy fund will help “institutionalize crypto investment.”
Given the growing interest of institutions in cryptocurrencies, Cointelegraph spoke with Matt Zhang during Algorand’s Decipher event in Miami to learn more about Hivemind’s plans to bring cryptocurrencies to institutions. Zhang also shared his thoughts on layer one networks, cryptocurrency regulations, and non-fungible tokens, or NFTs.
Cointelegraph: Thanks for joining me, Matt. Can you tell us why Algorand became your first partner And what other partnerships can you expect?
Matt Zhang: I’m a multi-chain maximalist and I think there will be a handful of layer one networks building amazing projects. Algorand provides enterprise and institutional customer quality for a number of blockchain solutions. If you think blockchain is a big space, you have to bet that it will be available for the next 10 years. Therefore, the funds must find partners who can survive for the next 10 years. The entire crypto ecosystem currently represents just under $ 4 trillion; that’s how small we are. People need to slow down and find patient partners who want to build long-term.
I am also in active discussions with many other leading layer one networks to ensure that Hivemind has a multi-chain network to help our investors see the best trading streams. I think layer one is a very different product among all blockchain ecosystems in the sense that these networks are what other crypto companies are building on. This means that if you are building a native cryptographic platform for services, you generally need to take advantage of one of the layer one networks, and you may want to take advantage of one of the larger, more established options. Hivemind is currently in different stages with other layers. I think it will be an ongoing effort and new partnerships may be seen in the coming months.
We also believe that there are many partners in the crypto ecosystem that are still using yesterday’s model in a humane way to drive deal flows. This can be efficient, but I think you need to use a layer one network to see the offerings first. Then we can use the technology to help companies build their own platforms. This is essential and is very different from the last era of asset management.
CT: What does it mean to “institutionalize investment in cryptocurrencies?”
MZ: First of all, it is important to note that yesterday’s investment model does not work in the world of cryptocurrencies. Second, I think there are still a lot of Wild West activities in the crypto space. If you want institutional investors to dominate, we have to do more than just tell them that investing in cryptocurrencies is a great opportunity.
“Basically, you have to tell investors that there is an opportunity here, but that we can also provide the infrastructure to allow institutions to access in the most compatible way. The opportunity and how to access must go hand in hand.”
We also want to differentiate ourselves by focusing not only on opportunity, but also on the second aspect that I mentioned. Institutional investors want to ensure that they do not take operational or regulatory risks. Cryptocurrencies are already interesting, so we don’t have to reinvent every aspect, but we do have to rethink the operational side of things.
CT: Are you saying that institutions demand holding hands?
MZ: Well, I think we need to give institutions confidence by helping them understand cryptocurrencies a little more. It takes a level of education, but keep in mind that these people are very smart. They manage trillions of dollars in assets, so they see it and they know it. They will also tell you why certain things don’t work. The conversation we are having with institutions is that they say this is a great sector and that they believe in blockchain, but investing in crypto is still a concern. In fact, one of the biggest concerns for many institutions is operational.
“For example, institutions want to make sure that the money they put into funds is safe and is not a home operation. They want to make sure that the fund is compliant and that regulators don’t have a problem with how it is used. money. All of this implies trust, which is something we have to build. “
I also think that the right amount of regulation is a good thing. I come from a highly regulated industry. If you want to make something common, you also need to work with regulators. Currently, all countries are at different stages of this regulatory process. Blockchain is decentralized, and to understand what decentralization really is, you have to think a lot. As such, it’s only fair that regulators take the time to understand and be wary of this space.
That said, it is very important that regulation does not stifle innovation. Innovation must work fast. The entire ecosystem must find a delicate balance to allow innovation to occur, while regulations keep pace to guide us through what can be done to make growth sustainable.
CT: Does Hivemind focus on a particular region?
MZ: The beauty of cryptocurrencies is that it can be based anywhere. There is this community focus, regardless of where the flyer starts. Eventually, many crypto projects today will be autonomous or have an entire community contributing to them. If you think that in 5-10 years this is where the innovation is, you can work backwards because it doesn’t matter where you end up.
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But where you start matters because there are regulations in certain countries that are more “friendly”. However, we want to support the best projects wherever they are. There are many visionary founders in the United States, for example. Since Hivemind is based in New York, we are going to take advantage of this and try to close deals here. But we are also interested in companies from Europe and Asia. We want to be systematic in finding these projects and supporting them with all the necessary tools.
CT: What do you think about NFTs?
MZ: Personally, I think NFTs are innovative and fun. But more importantly, I am very interested in what can be built on non-fungible tokens. Today, NFTs are widely used for art and games as collectibles. This is fun, but the NFT utility layer is what I think is most interesting.
For example, some ticketing companies are manufacturing tickets for NFT events. In the base layer, the NFT is a collectible that serves as a memento of an event. But, this NFT can also be used as a gateway to interact with fans in the future. Building the next layer of opportunities in addition to NFTs is what people in the crypto community will spend a lot of time thinking about; This is where I think the real value will advance.