Why did bitcoin crash? Kevin O’Leary, a bullish thesis for NFTs . explains

  • Bitcoin has had a bumpy few weeks amid rising prices, inflation and geopolitical risks.
  • Kevin O’Leary attributes $BTC’s volatility to a lack of institutional ownership at the sovereign level.
  • The Shark Tank investor explains why he still has 20% of his portfolio invested in digital assets and why he is bullish on NFTs.

After trading in a tight range for weeks, Bitcoin (BTC) tumbled as much as 7% on Thursday to fall below $37,000.

At $36,000, bitcoin is down about 24% this year and down nearly 48% from its all-time high of $69,000 in November.

The biggest cryptocurrency failed to rise and continued its wild experiment


volatility

Because there is a lack of institutional adoption at the sovereign level, according to Kevin O’Leary, venture capitalist, entrepreneur and star of the Shark Tank series.

“The reason why bitcoin remains in such a tight trading range is basically because nobody owns it,” he told Insider in an interview at the Crypto Bahamas conference. “I don’t mean it vaguely. I mean it’s owned by retail investors, high


net value

Investors, some hedge funds, some niche funds, but none of the sovereign wealth funds indexed it.”

The lack of crypto adoption by state-owned investment funds means that there is no buyer to support the market when the cryptocurrency drops. He explained that that could change even with a small 1% sovereign mandate, which is kept that way in perpetuity once indexed.

“If you have 1% weight and the price goes down, you buy more to get back to 1%,” he said. “If it goes up, you sell to 1%. That provides stability in the market, but we don’t have that.”

The drumbeat of news about the growing institutional adoption of cryptocurrencies is by no means just smoke and mirrors. At the Crypto Bahamas conference, which was co-hosted by 30-year-old crypto billionaire Sam Bankman-Fried and think tank SALT, half of the audience were institutional investors or governments that don’t own any cryptocurrency at all, O’Leary notes.

Kevin O'Leary with Sam Bankman-Fried from FTX

Kevin O’Leary chats with FTX founder Sam Bankman-Fried on the sidelines of the Crypto Bahamas Conference.

Vicki Ge Huang / Insider


“They are here because they are watching the momentum and politics begin to change,” he said, referring to the three bills from US Senators Pat Tome, Bill Haggerty and Cynthia Loomis being put in place through bipartisan committees on Capitol Hill to create the regulatory framework for cryptocurrency.

On top of those bills, President Biden in March signed an executive order on cryptocurrencies, calling on federal agencies to study the risks and benefits of digital assets while encouraging the Federal Reserve to continue its assessment of central bank digital currency. The demand has been positively interpreted by the cryptocurrency industry as a major step towards gaining regulatory clarity in the US.

“We now know for sure that it won’t become illegal, so it’s all happened in the last four months,” he said. “This is a boundary.”

Maximize and diversify crypto bets

As an institutional investor, O’Leary cannot allocate more than 20% of his portfolio to any of the 11 sectors within the S&P 500. His conviction is that he believes digital assets will become the 12th sector of the blue-chip index.

“So we took the view that cryptocurrency is a sector and we moved our weight to 20%,” he said. “Within a mandate like this, you are only able to have a 5% weighting in any one name. This is a classic corporate mandate.”

Today, O’Leary holds 32 positions in digital assets, which consist of tokens as well as stocks of crypto companies including FTX, Immutable Holdings, WonderFi and BitZero.

His strategy is to have the institutional infrastructure plays that support crypto activities and diversify his bets across tokens, projects and companies. For example, his portfolio includes Layer 1 protocols Solana (SOL), Avalanche (AVAX) and hydra (HBAR) as well as the second layer scaling solution ribbed (Matic), a decentralized wireless network helium (HNT), decentralized exchange Serum (SRM).

“I have to get diversification,” he said, “that’s my main motivation.” “You don’t need all of them to be successful, I need four of them to be successful. It’s like investing in risk, you’re lucky to get 20% to work, but when they work, they pay for all the mistakes I made.”

Connecting NFTs to physical assets

O’Leary is an avid watch collector, and is optimistic about how NFT devices can disrupt and revitalize the secondary market for the high-end watch trade.

According to consultancy McKinsey, sales of the $29 billion pre-owned watch market are set to reach $32 billion by 2025. The rapid growth and high value of the asset class has also attracted fraudsters.

“There are a lot of replica Rolex watches being made because the demand is so high,” he said. “It’s very hard to tell the difference.”

In his opinion, this problem could be solved if watchmakers simultaneously issued an NFT containing all calendar information, serial number and all other authentication information. Plus, they can take ownership every time the clock changes.

O’Leary is betting on the spread of NFTs with its stake in Immutable Holdings, which owns early stage projects including NFT.com, 1800Bitcoin.com and CBDC.com,

Ultimately, he sees NFTs becoming the technology that supports and certifies passports, real estate bonds, conference tickets, and driver’s licenses.

“Why should I carry a card that I can lose when I can have the NFT connected to my mobile device, just show the police officer my driver’s license, and he’ll know for sure it’s been certified,” he said. . “This is coming and that’s what the NFT platform will work on.”

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