Crossgate cryptocurrency offer focuses on established assets
New Zealand’s first regulated share offer for a company investing in cryptocurrencies says it has focussed investment primarily in the more established cryptocurrencies as opposed to the long tail assets.
Crossgate Capital Limited’s Scott Lester said today that while the conversation about Bitcoin is predominately about price, Crossgate is an investment firm – as opposed to a trader – and therefore more interested in the long-term fundamentals.
“Discussions and commentary have been dominated by price volatility, which is to be expected with any emerging asset class -- there will be significant fluctuations as the market grapples with how to determine what a fair price looks like. Crossgate Capital focusses on the significant development work being undertaken in a digital asset, which continues regardless of the current price.
“Bitcoin has been around the longest, and it currently has a market cap around 50 per cent of the total market. Bitcoin was always intended as a means of currency that you can transact with on a daily basis. To do this it needs to handle a significant level of activity and therefore be scalable.”
The Lightning Network is intended to address this scalability issue and enable thousands of transactions a second, allowing Bitcoin to be used for day to day micro payments.
“There is huge scope for growth if the Lightning Network can prove itself to be secure and usable. Development work is ongoing to enable mass adoption. Similar comparison is the mobile phone. When it was launched few could have anticipated how it has developed over time to be an integral part of everyday life and become so widely adopted,” Lester said.
Crossgate Capital believes the infrastructure for cryptocurrency investing has now evolved to the point which allows for institutional interest.
“Examples are BitGo Trust Company, which provides institutional-grade, cold storage to store the digital assets, and Brave New Coin -- a data and research company focused on the blockchain and cryptographic assets industry – both of which have been engaged by Crossgate Capital as we seek to partner with leaders in their field.”
Lester says that Crossgate Capital invest based on fundamentals not retail hype.
“Our approach is to review a range of indicators to assess the long-term potential of the cryptocurrency. We want to invest in the cryptocurrencies which have a reason for being, and which have a more established developer community.
“As a share offer, we don’t want to act as a vehicle for the plethora of smaller coins out there. We’re happy staying in the shallow end. Our objective is to get returns for our investors while also mitigating risk as far as possible in what is a high-risk asset class.”
By favouring more established cryptocurrencies over long tail assets, Crossgate Capital is positioning at the ‘big end of town’ because they consider that there is a significant risk that a proportion of the smaller assets may not exist within a few years.
“To reduce risk, we only invest in cryptocurrencies which have a market cap of NZD $500 million dollars. These assets also have relatively more liquidity when compared to the smaller cryptocurrencies,” Lester said.