A Beginner’s Guide to Crypto
Christopher Manessis, chief investment officer at Moonchain Capital, has a few tips for those who are eager to break into the cryptocurrency investment landscape
You were once a pizzeria owner. How did you transition to the world of cryptocurrency? Yes, but I sadly don’t have one of those wild pizza Bitcoin stories. I transitioned to cryptocurrencies in late 2016. I started investing in Bitcoin and Ethereum, and also participating in ICOs after a friend told me about the disruptive potential of distributed ledger technologies. I have been investing in cryptocurrencies in a professional capacity ever since.
Do you remember the very first time you tasted success with cryptocurrency, and also have you ever burnt your fingers? Yes, of course. You never forget your first successful investment. During the ICO boom in 2017, I invested in a novel Ethereum competitor called Zilliqa. It was my first significant trade where I made almost 20x my money. Yes, there is no reward without risk. I have on rare occasions been wrong with my investment and lost 80 per cent of my money.
What is the sort of advice that you’d offer to a complete newcomer who wants to begin investing in cryptocurrency? Keep things simple. There is no diversification in crypto. Find projects you are genuinely passionate about and believe in long-term. Don’t invest what you are not prepared to lose. Crypto is not a get-rich-quick scheme; some people have gotten lucky, and you might too, but there are no guarantees. Don’t invest in cryptocurrencies led by teams that constantly make excuses for their lack of execution and progress.
Is there a right time ever to cash out, or is investing in crypto a long game? It depends entirely on individual circumstances. If taking profits can significantly improve your way of life, then do it. If you don’t need the money right away and have a firm conviction in your investment, then be patient and hold on to your investment for as long as you can. Selling too early is just as bad as selling too late. There is no way to time the market, and no one knows what will happen next, so utilising an effective risk-reward strategy is the surest way to remain in the game.
How would you advise balancing crypto investments vis-a-vis traditional investments such as real estate, gold, and stock markets? I always advise allocating a small percentage of your portfolio (1-5 per cent) in crypto to get started and increase your allocation size based on your risk-reward profile. Cryptocurrencies are highly asymmetric investments, so you don’t need to allocate much to make a solid overall return. On average, most coins have provided 10x returns to investors since 2020. This is not a solicitation or guarantee that the same returns are possible in the future. Still, it gives a realistic example of the risk-reward potential cryptocurrencies can provide investors.
Are Dogecoin and Shiba examples of a far too casual and reckless approach to cryptocurrency? Not always. Meme coins like Doge and Shiba are no joke. They are backed by incredibly passionate communities and form part of investment theses in many well-respected modern investment firms. That said, their risk-reward profiles are highly elevated, so investors should invest in these coins with extreme caution. Meme coins can have short life expectancies and quickly lose their widespread appeal and value. It is also important to note that not all meme coins are alike; most meme coins are giant Ponzi schemes.
All cryptocurrencies are not equal. Which ones are currently faring better than their peers, and are there undiscovered gems out there? In my opinion, very few cryptocurrencies are worth buying. Today, investing in crypto assets is like selecting the winners post the dot-com bubble. Many internetrelated stocks failed, but if you invested in Amazon, Google, Apple, and Microsoft and held your position until today, you would have done exceptionally well. I am personally very bullish on Solana and their ecosystem – primarily around Solana based Play-to-Earn (P2E) games. I also believe Bitcoin, Ethereum, and a few Ethereum competitors will be here in the future and will be worth a whole lot more than they are today. Otherwise, plenty of talent is going full time into crypto, so there will be a lot of gems emerging in the near-term future. Keep an eye out for NFT and gaming-related projects. They have mass appeal and will bring millions of users to crypto.
What are the regulations that are necessary to grow the crypto investments landscape responsibly worldwide? We need regulations that are specific to the crypto industry. Applying our outdated financial regulations to the crypto industry will hinder innovation and progress. I firmly believe that regulators worldwide should foster a safe harbour approach. They should let new crypto projects build their services with lit
“Keep things simple. There is no diversification in crypto. Find projects you are genuinely passionate about and believe in long-term.”
tle-to-no oversight, observe how users interact with these cryptocurrencies and then work with lawmakers to design new rules to protect investors.
That said, I also believe too much emphasis is being placed on regulation and not enough on education. Most financial institutions are burdened with regulatory oversight today because of the lack of education amongst retail investors. Proper education programmes can help reduce overregulation whilst protecting the market. The Swiss regulators known as FINMA were the first to introduce a classification of cryptocurrencies in 2017, which provided enormous clarity to projects and investors. FINMA immensely helped Switzerland become an incredible hub to launch new crypto projects. I think more regulators should provide clarity as FINMA has done.
What are some ways that both individuals and crypto exchanges can safeguard their crypto assets? As a general rule of thumb, don’t keep any sensitive information like passwords or private keys online; ideally, store this information in a notepad in a safe or bank vault. Don’t store your crypto on exchanges; keep them in a hardware wallet (like a Ledger), or for institutional investors, use institutional-grade custodians like Coinbase custody or Copper. Also, use two-factor authentication on your exchange accounts or, ideally, a 2FA key like Yubikey. If you are using a web wallet like Metamask, don’t interact with websites you don’t fully trust and remove connected sites after using them.
What is the core model of Moonchain Capital and can you give us a business overview of it? Moonchain Capital is a crypto holding company based in Geneva, Switzerland. Our investment thesis revolves around NFTs, NFT platforms, and gaming. These segments of the crypto market have mass appeal and will help onboard millions of users into crypto. Although we only invest from our balance sheet, we have recently partnered with DIFC-licenced investment house, Audacia Capital. We are aiming to launch a crypto/ web3/metaverse themed fund during Q2 to enable investors to get broad exposure to this incredibly exciting space.
How do regions like Dubai and other regions within the Middle East fare when it comes to maturity and adoption of cryptocurrency investments? I think Dubai has incredible potential to become a world-renowned crypto hub. The two local crypto players in the region CoinMena and Rain are both regulated by the central bank of Bahrain, which has taken a proactive approach to regulating cryptocurrencies and businesses. Very few countries have released clear regulatory guidelines for cryptocurrencies, except Switzerland, Singapore, and El Salvador, which has gone as far as declaring Bitcoin legal tender. I am highly impressed with the commitment to innovation in Dubai and the UAE, so I am confident that in due time Dubai [can become] an international crypto hub.
What are your broad predictions for the crypto market in 2022? Volatility is the trend for 2022. We are currently in a bear market; Bitcoin has corrected approximately minus-40 per cent since its all-time high, and many other cryptocurrencies have corrected by around minus-60 per cent or more. I expect some cryptocurrencies to bounce aggressively and post double-digit gains, but this is contingent on macroeconomic events; geopolitics, global interest rate hikes, and recession fears which all play a crucial role in how cryptocurrencies perform. They are an evolving asset class and are increasingly reactive to macroeconomic externalities. Despite short-term woes, I am confident crypto assets will outperform other asset classes. For the patient investor, 2022 has presented an incredible buying opportunity.
Disclaimer: Nothing mentioned here should be taken as solicitation to trade or a recommendation of a specific trade