To some, cryptocurrency and NFTs are the way of the future as an alternative way to gain wealth while having the ability to control one’s own money. A recent NBC News poll found that 1 in 5 Americans, and half of men between the ages of 18 and 49, have invested in or used cryptocurrency.
To others, cryptocurrency is an industry heading towards an inevitable crash due to its lack of regulation and inherent value while being manipulated by a small number of financial elites. The current economic downturn may be proving critics right.
Luna, the sister token of stablecoin Terra USD, dropped to $0 last month after at one point being worth over $100. That same month, crypto trading platform Coinbase Global Inc. posted a first-quarter loss of $430 million while its stock was down nearly 77%. Those drops have come at a price to employment in addition to potentially huge investor losses. Last week, Coinbase said it extended a hiring freeze for both new and existing positions and rescinded some job offers.
The latest losses in the crypto market have raised concerns about the volatility of the industry and the potential danger it poses to those who make investments into it.
Recently, a group of 26 influential technology personalities sent a letter addressed to Senate Majority Leader Charles E. Schumer (D-N.Y.), Senate Minority Leader Mitch McConnell (R-Ky.) and House Speaker Nancy Pelosi (D-Calif.) detailing the potentially catastrophic dangers of cryptocurrency.
The letter in part read that the “catastrophes and externalities related to blockchain technologies and crypto-asset investments are neither isolated nor are they growing pains of a nascent technology,” going on to say that “they are the inevitable outcomes of a technology that is not built for purpose and will remain forever unsuitable as a foundation for large-scale economic activity.”
Graham Gintz, a mentor at the Zane Venture Fund and analyst for the Atlanta Technology Angels, has seen first-hand investor sentiment around cryptocurrency because of his startup Knightley. The startup is a software platform that helps entrepreneurs connect with investors, package their pitch materials and analyze their tractions. It was featured in Atlanta Inno’s Startups to Watch 2022.
Atlanta Inno spoke with Gintz on how he views the current state of cryptocurrency and how it will shape in the future.
Critics will say that crypto is akin to gambling. But the same argument could be made for real estate and stocks. Is there anything about crypto that makes it more of a gamble?
With crypto, we have very little data and so you have a lot of these cryptocurrencies that are effectively startups. For a long time and for a lot of people, there were a lot of protections in place from the U.S. Securities and Exchange Commission to make it so that the non-accredited investors can't participate in super early-stage private companies unless they hit certain requirements. Crypto is kind of its own unique animal where it goes to market really, really quick before the project is tested. That's actually really comparable to what happened in the .com boom in the late '90s. There were all kinds of famous disaster companies that went to zero, and all the investors lost their money. But there were companies like Amazon, which obviously had good fundamentals and had a mission in the right team.
Crypto, especially on the currency side, is absolutely kind of in that same maturity state now, where there are absolutely going to be some winners. But there's also a lot of startups that are doing some really interesting things that are gonna fail. And unfortunately, the people that back those projects are not gonna see a return. I think the thing that gets the average consumer so excited about crypto is that liquidity is obviously way better than investing in startups. I mean, you can flip money in hours, not years. But it also has the accessibility of anyone, anywhere in the world can kind of be chasing and tracking these projects. So, just like anything else, I think crypto is a super ultra-high risk market.
You are the head of a company that handles people’s financial and investment portfolios. Based on what you’ve seen at Knightley, has excitement in crypto and NFTs grown, and how have investors reacted to the recent downturn?
Everything is down to a degree. B2B is down, SaaS is down. There's a lot of industries that are down right now. I think you have to come out and put crypto into a couple categories. The last number I saw is a little over 41 million Americans are invested in crypto in some way.
I would guess that a huge percentage of that plays in less than 5 coins, and that is kind of your ultra blue chips that are more battle-tested kind of currencies like Bitcoin and Ethereum that makes up a large percentage of people's crypto portfolio.
Everybody uses investing as a way to learn about new stuff, get access and get exposure to different communities and different kinds of topics. And so we're seeing people investing at a higher and faster rate. I wouldn't say we're seeing whales going all in setting a second mortgage on their house to buy Bitcoin. But we are seeing kind of the same steady level of investing that I do think is comparable to the world of venture.
Yes, there's a lot of turmoil right now in terms of the venture markets, but it's seed and pre seed. People recognize now is a good time to build. There's a whole bunch of talent that is looking for new things and venture capitalists at the early stages are writing at the same pace that they've been writing over the last handful of years.
What do you make of the recent letter sent to Congress?
I think that they're trying to address a handful of coins, some that do have big market caps. But I think that a lot of those principles from investing and how you value things, you could say the same thing about non-profitable publicly traded software companies. Why do they hold crazy value? I think WhatsApp sold for around $20 billion and had less than $1 million in lifetime revenue. A lot of those same underlying principles around this kind of social media, apply to crypto. There are plenty of projects that are turning a corner and doing some of those things.
From an institutional standpoint, yes, there's a lot of people that are viewing crypto as more of a commodity than a security. We're going to get a lot further clarity from the government's perspective in terms of who's overseeing some of this stuff and and how projects and how these companies can better work with the federal government. A lot of times it's very gray, and there's not a clearly defined stance on one side or another of how the SEC views things or how the IRS views some of these things. From a regulation standpoint, clarity would be in the best interest of everybody.
What regulation does crypto need?
Bringing industry and government together and holding important conversations to write laws for these new industries and having people that understand them is probably a good thing. Most companies that I've talked to in this space would be happy to share our opinions and experiences with lawmakers to better educate on some of the positive use cases. Part of how we plan to use crypto at Knightley and use NFTs is to fund college scholarships. That is something that is inherently good on a macro- and microeconomic level.
What are the different possibilities for crypto to be a positive social force?
There's an Atlanta-based company called Yellow Card that is basically helping Africans in 14 countries. A ton of Africa is underbanked, meaning they can't get access to credit and any kind of stable banking institutions. Yellow Card provides them an exchange as a way for people to invest and put their money into more stable things that they can then use to purchase locally when they can't get access to things like credit cards. We're seeing use cases where it's creating new revenue streams for small businesses and small creators to where they can offer digital products and additional to physical products that they couldn't do before that are really clean. I don't think there's harm in buying effectively a digital sticker from my favorite kind of sub shop down the street if it is something that I find cool and want to collect as a consumer. That can drive meaningful revenue for a business like that, especially in hard times.
Do you view Atlanta as a potential hub or hotspot for crypto either currently or in the future and what could it be doing to get to that point?
Atlanta influences everything. That's what we like to say. We have a lot of the creative industries that are here. We have a lot of fintech companies here. I think Atlanta is the perfect cross section of creative and financial technologies to where it could be a magical place for crypto. We just have to work on it from a cultural standpoint to really just get everyone together, to unite, to kind of come out of this post-Covid world and start. There's a handful of crypto companies that have been here a long time, and there's a whole bunch more that are forming up. I'm the CEO of a company that builds its own cryptocurrencies, and we're based in Atlanta. So I personally am incentivized and motivated to try to make crypto a thing that happens here. We have all the talent and everything else from all the universities. I just think it's a matter of time.
