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I want to bring in Antoni Trenchev, co-founder and managing partner at Nexo. So thank you for joining us this morning. Starting on bitcoin and the rally we’ve seen, I’m curious in your view, what’s been the real driver of this? I have heard, you know, a few different theories out there. One it’s, it’s an alternative investment for in the investment community, a safe haven of sorts. Another that the Libra announcement has really just brought attention to the whole sector and therefore investors are becoming more acquainted with it. In your view, what’s been behind the real rally recently?
Well, I think there has been a perfect alignment of a few favorable factors. We see the geopolitical turmoil that certainly has helped the cause of Bitcoin; the bear market of 2018 — we have seen even the harshest proponents turning skeptical at some point. And this usually is the inflection point from which assets start to rallying again.
But I think it is really about institutional support and the implication that it has in terms of mass adoption. We see Facebook coming developing their stablecoin Libra. We see JP Morgan developing their coin later on this year. We see Fidelity joining the space. We see the Yale Endowment Fund.
So I think people are really starting to notice and appreciate the fact that bitcoin is here to stay.
And at Nexo, we see this every day because more than 70% of our clients actually have their instant credit lines secured by bitcoin. And we see hundreds and hundreds of people joining the space on a daily basis.
Based on that view, you’ve obviously highlighted the positives of Bitcoin in those big institutions that are becoming involved. Would you say that the concerns or the doubters out there around cryptocurrencies are those concerns exaggerated?
Well, you know, bitcoin has been pronounced close to 300 times to be dead. And it has a risen from the ashes yet and yet again.
So I think the doubters are having a really hard time here, continuing their cause.
One of the interesting road to travel down I think is, is to look at what Libra is not of what a bitcoin is or vice versa. Because one of the issues around Bitcoin, and I think the confidence that people have lacked is just the fact that a lot of the transactions involving bitcoin have taken place in darker areas of the Internet. And it’s been perceived as a currency that’s been involved in transactions related to drugs and guns and so on and so forth. The thing about Libra is everything that happens with Libra is clearly documented and visible here. I wonder if you could just spend a moment because you’re the expert. I’m not, you’re the one that runs the cryptocurrency lending business. Can you just explore that for us and perhaps explain why, even though I understand the institutional acceptance argument and why that might be helping BTC right now, the reality is that Libra and bitcoin are different animals.
Absolutely. They’re very different and I think both have their pluses and minuses. Obviously, what you said about Bitcoin, that was true, especially in the beginning and the very, very early years of bitcoin where it was all about Silkroad and the dark web.
And I think we moved on from that. But even so, you know, the number one choice of the money launderers and the criminals of the world in terms of currencies is the US dollar, hands down. The laundering of illicit proceeds are a multiple of the entire market cap of cryptocurrencies.
But I think the beauty of Bitcoin is the fact that it’s truly decentralized and that makes it censorship resistant. It makes it permissionless and you cannot print that at will. And if you are looking for reasons why it is appreciating in value I think is based on these fundamentals.
Now Libra, on the other hand, is quite a different creature as you said because it’s going to be much more stable. It’s backed by a basket of currencies. I was actually a bit sad that it’s not including bitcoin and gold in the mix. That would have made a lot of people happy in the industry, but nevertheless, it could be a means of payment. Bitcoin is not going to be anytime soon. You’re not buying your Starbuck cup with something that tomorrow might be worth 10x or 20x in a year. So Libra is a very different breed. It has the potential to become what we believed early on bitcoin will be and is this means of social inclusion and mass adoption for the underbanked.
Let me ask you, I mean if I’m in that camp where I am worried about the future and I want to own something that is non-correlated and maybe I’ve looked at a cryptocurrency, why would I buy bitcoin rather than buying gold right now?
You should buy both — at least that’s what I’m doing. But they have different merits. Bitcoin is permissionless just like gold, but it’s much faster to transact with. It occurs at a fraction of the cost and it has been the best performing asset of the past decade, even with the bear market of 2018, which saw declines of 70, 80%.
Can I just ask you about your business specifically? And about the outlook for Nexo this stage. What plans do you have to expand this operation going forward?
We’re very happy where we are today. We’re seeing unprecedented levels of demand for our credit lines. We are developing a Nexo card, which is going to redefine the way people spend the value of their crypto without actually selling it.
We are looking to acquire commercial banking capabilities and we are just so excited to be onboarding Libra and also to be joining the Libra Alliance.
Perhaps linking it to what we’ve been discussing for months on the show or trade restrictions and sanctions. Can bitcoin and cryptocurrencies be used to circumvent trade restrictions?
Yes, they could. I think they are also being used, but that is a fraction of the total market cap. I think cryptocurrencies as a whole have legitimate purposes and use-cases and that is what they are being used predominantly for. The whole narrative about illicit activity should they push aside and we should focus on the positives. They’re that much more than the negatives.