As the space matures, institutional interest in cryptocurrency is growing. Nickel Digital Asset Management released a survey on December 8 that found that 85% institutional investors and wealth managers have designated teams to examine cryptocurrencies and other digital assets. According to the study, around $108.4 trillion in assets was managed by the investors surveyed. In September, the London-based firm released a report showing that 62% global institutional investors have zero exposure to cryptocurrency and expect to make their first investments in crypto within the next year.
It is also noteworthy that Wall Street veterans are now entering the cryptocurrency industry. Matt Zhang, an ex-trading executive at Citi, has launched a new venture fund that is exclusively dedicated to cryptocurrency and blockchain startups. Zhang, also known as “Hivemind capital Partners”, previously stated in a Cointelegraph article how the multi-strategy fund of $1.5 billion will “institutionalize cryptocurrency investing”.
Cointelegraph spoke with Matt Zhang at Algorand’s Decipher in Miami to find out more about Hivemind and their plans to bring cryptocurrency to institutions. Zhang shared his thoughts about layer-one networks and cryptocurrency regulations, as well as nonfungible tokens (or NFTs) with Cointelegraph.
Cointelegraph: Matt, thanks for being here. Were you able to tell us about Algorand and other possible partnerships?
Matt Zhang: I am a multichain maximalist. I believe there will be a few layer-one networks that build amazing projects. Algorand provides enterprise and institutional clients quality for a variety of blockchain solutions. Blockchain is a huge space. You can bet it will continue to exist for the next 10 year. Funds must find partners who can last the next 10 years. The total crypto ecosystem is currently worth just $4 trillion. This is how small we are. It is important to slow down, find patient partners who are willing to work with you long-term.
To ensure Hivemind has a multichain network that will allow our investors to see the best deal flow, I am also actively in discussions with other top layer-one networks. Layer one, in that it is what other crypto companies build on top of, I believe, is a unique product in all blockchain ecosystems. If you want to build a crypto-native platform for services, then you will need to use one of these layer-one networks. You may also want to utilize one of the larger, more established options. Hivemind is currently in different stages with other layers. This will be an ongoing effort and you may see new partnerships in the coming months.
We believe that many of the partners in the crypto ecosystem are still using yesterday’s model to drive deal flow. While this can be very efficient, I believe that a layer-one network is necessary to first see the deals. The technology can be used to assist companies in building their own platforms. This is a crucial step and is very different from previous eras of asset management.
CT: What does “institutionalize crypto-investment” mean?
MZ: It’s important to note that the investment model of yesterday doesn’t work for crypto. Second, I believe there are still many Wild West activities taking place in the crypto world. Institutional investors must be more than simply telling them crypto investing is great.
You basically need to inform investors that there is a chance here but also that we will be able provide the infrastructure necessary to enable institutions to access it in the most compliance way. Accessing the opportunity and accessing it must be a two-way street.
We want to be different by focusing on both the opportunity and the second aspect. Institutional investors want assurance that they are not exposed to regulatory or operational risks. Crypto is already fascinating, so we don’t have to reinvent everything, but we need to rethink how we operate.
CT: Do you think institutions need hand holding?
MZ: I believe that institutions need to have confidence in crypto by teaching them more about it. These individuals are extremely smart and require a certain level of education. They have trillions of dollars worth of assets and they can see it all. They can also explain why certain things do not work. We are hearing from institutions that while they think this sector is great and they believe in crypto, investing in it is still a concern. Operational is the greatest concern for many institutions.
“Institutions want to make sure that money they give to fund is secure and not just a hobby. They want to ensure that the fund is compliant, and that regulators aren’t concerned about how the money is used. This all requires confidence which we must build.”
Also, I believe that regulation should be balanced. I am from highly regulated industries. You must also work with regulators if you want something to become mainstream. Today, all countries are in different stages of the regulation process. Blockchain is decentralized. To understand the implications of decentralization, a lot of thought must be done. Regulators should take the time to learn and be cautious in this area.
However, regulation shouldn’t be a hindrance to innovation. Innovation must be fast. Innovation must be possible in a balanced ecosystem. Regulations should keep up with the pace of innovation and guide us as we move forward.
CT: Is Hivemind focusing on a specific region?
MZ: Crypto is a global currency. This community approach is available regardless of the location from which you launch a flywheel. Many crypto projects will eventually be self-governing or have a whole community contributing to them. You can think of this as where innovation will be in five to ten years.
Related: India’s tech dominance could be maintained by smart crypto policy
It is important to know where it begins because regulations vary in different countries. However, we are committed to supporting the best projects, wherever they are. For example, there are many visionary founders here in the U.S. Hivemind’s New York headquarters means that we can leverage this to try and close deals. We are interested in companies from Europe and Asia. To find and support these projects, we want to be organized.
CT: What do you think about NFTs?
MZ: I believe NFTs are both innovative and entertaining. More importantly, I am interested in the possibilities of building on non-fungible tokens. NFTs are currently being used for art, gaming and collectibles. While this is great, I find the utility layer of NFTs more fascinating.
NFT tickets are being offered by some ticketing agencies. The NFT is a souvenir that can be kept as a memento of an event. This NFT can be used to connect with fans and help them move forward. The crypto community will spend a lot time thinking about how to build the next layer of NFTs — this is where I believe the real value will lie moving forward.