Stelian Balta, the CEO of HyperChain Capital says that over the next 2 years the fund will be investing approximately $50 million into the blockchain ecosystem. In this exclusive interview, Balta shares his thoughts on contactless transactions, the current state of U.S. debt, and why he thinks that the 2020s could mark the dawn of a new era for bitcoin.
In 2013, Balta sold a mobile games company and began investing in crypto. His first investment was in MasterCoin, he was also an early equity investor in companies like Block One (EOS) and the Kyber Network and participated in ethereum’s ICO. Today, HyperChain Capital is known as a veteran digital asset management firm—one of the few that actually survived the 2018 bubble burst.
Without a question, COVID-19 has sent shockwaves throughout the financial markets. In March 2020, the stock market took a massive dive. Bitcoin and altcoins followed suit as investors liquidated their investments fast in pursuit of cash. Not only has the pandemic took its toll on the economy, but also on a social level too with lockdown policies that enforced social distancing.
As a result of COVID-19, Balta believes that this paints a strong case for the digitization of the dollar. Balta says, “There are many benefits to be had from replacing cash with digital currency. Firstly, in light of the pandemic, there’s going to be a big focus on contactless transactions in the future, which can’t be done with cash.”
Balta adds, “There are also other benefits such as instant transactions, lower fees, and greater efficiencies. We already know that several central banks such as Sweden and China are close to implementing their own version of digital currencies, so it seems only a matter of time before the Fed follows.”
The state of U.S. debt
Recently, U.S. debt hit a staggering $25 trillion, a record high that many people expect to only further increase as the Fed continues to print money. In an interview with 60 Minutes, the Fed admitted to flooding the system with money.
The Fed said, “We have the ability to print money digitally and we do that by buying treasury bills or bonds or other government-guaranteed securities—that actually increases the money supply. We also print actual currency and distribute that to the Federal Reserve Bank.” In effect, the Fed can print as much money as the like to prop up the economy. And, this is happening right now.
When asked if people could lose faith in the dollar, Balta says, “I don’t think people will lose faith in the dollar—at least not in the long term. But I do think the digitization of the dollar might become inevitable in the long term because of so many direct benefits. Crypto-inspired technologies could have an interesting role in this case.”
Balta adds, “We do see instances across the globe where people start to lose faith in their national currencies. The situation in Lebanon at the moment has led to protests with people setting fire to banks, which is evidence of a high level of discontent at the way the economy has been managed.”
“However, the US is in a different scenario. In countries like Lebanon or Iran, they already had economic issues before the pandemic hit, whereas the US economy and the dollar were undergoing a record period of growth.”
The world is undergoing an unprecedented change. Balta is of the opinion that cash has a depreciating value, meaning you lose value from your money as time goes by. Currencies around the world are on the brink of negative rates and amidst unprecedented printing.
Balta says, “Getting an inflation or deflation hedge, such as bitcoin, in your portfolio, can be a prudent thing to do to mitigate risk. It’s really hard to find something to invest in to not be correlated with anything, especially in the deflationary environment which we might see after the COVID-19 crisis.”
“While the thesis of bitcoin investment is that of inflation, a deflationary event could benefit the cryptocurrency. Also, since the halving (where the issuance of bitcoin dropped from 12.5 coins to 6.25 coins every ten minutes), bitcoin has decoupled from the stock markets. In the past hundreds’ of years, the best inflation hedge was gold. Now, this could be bitcoin’s era.”
Looking to the future
Balta is convinced that decentralized finance (DeFi) is still finding its feet. He admits that whilst there have been some significant setbacks this year, there will be a heavy focus on cross-platform interoperability. “If ethereum-based DeFi applications can start to unlock some of the massive value tied up in bitcoin and bitcoin derivatives—then that could be a huge area of growth in the next few years.”
“We’re aiming to deploy more than $50 million dollars in the next 2 to 3 years in the blockchain ecosystem, especially in promising early-stage companies. We live in such unique and challenging times, there are so many opportunities and problems to solve in the market.”