Crypto crash an ‘incredible buying opportunity’ – DigitalX CEO
The cryptocurrency crash represents a huge buying opportunity, with the fundamentals of the market remaining strong, according to two Australian institutional fund managers.
Both Apollo Capital and DigitalX (ASX:DCC) are unruffled by the recent volatility in the market and even view it as a positive development.
The board of DigitalX, believed to be the only ASX-listed company holding Bitcoin, on Friday resolved to double its $750,000 original seed investment into its DigitalX Digital Asset Fund over the next 40 days, following the recent correction.
That original $750,000 investment was worth $2.5 million as of Thursday, DigitalX said.
While there’s been negative recent headlines, strong fundamentals for cryptocurrency “just really points to an incredible buying opportunity — and absolutely, that’s what we’re trying to do,” executive director Leigh Travers told Ausbiz television this afternoon.
Travers said highlighted upcoming protocol enhancements to Ethereum, which is transitioning to an energy-efficient proof of stake design this year, with a scalability “sharding” upgrade set for 2022.
“It’s looking at a thousand times improvement — that’s happening for scalability, the number of transactions coming through, and the cost of those transactions over the next year,” he said.
“I think that’s where investors should be focused on, and what sort of opportunities that’s going to create.”
The upgrades should reduce Ethereum fees to around 1c or 2c, from a recent average of around $20. Fees have skyrocketed in recent months as the network has become clogged.
“After these technology upgrades, there’s going to be a tremendous amount of new opportunities to build applications,” Travers told Ausbiz.
Twenty three per cent of all Ether is locked in smart contracts, while 12.5 per cent is on exchanges, indicating that people are using the network in more useful ways than just speculating on price action, he said.
“I think that’s a really positive development, compared to 2017/2018, when that certainly wasn’t the case,” he said.
Meanwhile, Apollo said in a blog post while the sell-off was “brutal” it was also healthy for the medium-term health of the market.
As exchanges like ByBit, Binance and FTX offer more highly leveraged products to retail investors, smaller coins had experienced wild price swings.
The crash was “a liquidation driven event as this excessive leverage was flushed out of the system,” analyst Matthew Harcourt wrote.
Getting rid of that excessive leverage will enable crypto markets to grow more organically going forward, he said.
He wrote that the panic “presents a unique opportunity to enter the market”.
“In comparison to similar drawdowns seen in the 2017 ICO bubble, crypto is no longer an abstract bet on the future, but a growing reality all around us.”
At 4.48pm AEST, Bitcoin was trading at US$38,650 ($50,370), having found support at US$38,000 but resistance at US$40,000.