What is driving institutions to invest in crypto? | Interview with David Olsson

Hello, my name is Joe. I'm here with David Olson from Blockfire Today and we're going to talk a little bit about Europe institutions and of course, the new money coming into cryptocurrency. So, David, it's lovely to be with you today. Would you like to introduce yourself to our readers and watchers at home?

Sure, absolutely. Thanks. Thanks, Joe, for having me here and speaking with us. I'm David Olson. I'm the global head of institutional distribution at BlockFi. For those of you that don't know about BlockFi, we're a financial services company in crypto that serves both retailers clients with wealth management products, including crypto backed loan interest accounts, trading from one cryptocurrency to another, and a bitcoin rewards credit card. In the US on the institutional side, which is the side that I'm most closely associated with, we have an institutional platform called BlockFi prime, where our clients can finance for capital efficiency, borrow coins for hedging and shorting, as well as an institutional grade trading infrastructure that they can avail themselves of globally. 24 7.

Fantastic. Yeah. And of course we're here today in La Bourse, which is the former stock exchange. And you know, the big thing that everyone's talking about is institutional money, you know. But before we get into that, you of course have a big focus on Europe. You spend a lot of time working in London and Credit Suisse. What would you say is the strategic importance of BlockFi's European operations for the global group?

At the moment, BlockFi is really ramping up its international strategy. So we really think that it's. Obviously the US is our, is our base and where we're headquartered and where two thirds of our clients are. But we see a lot of opportunity and international expansion. We recently incorporated a Bermuda entity and our staffing up there to be a hub for our international business and moving our retail clients and institutional clients into that entity. But it's also important, and we really feel that being a credible player means that we need to also be regulated. And as we saw in the us, we've reached sort of a landmark agreement with, with the SEC and will also be looking to participate in other markets that are extremely important. One of those is Europe. And the UK is the most obvious, is the most obvious place, given the deep pool of talent as well as the financial services industry there.

Fantastic. Yeah. I mean, are there any interesting European or maybe UK trends to pick out from amongst the BlockFi portfolio of clients that you manage?

Absolutely. So we have talked, I would say, out of the top 50 hedge funds in the world. We've probably spoken to about 80% of them. They all are embarking on some sort of crypto journey of starting a desk or for the moment, a lot of them are investing into crypto native firms run by 25, 30 year olds that know how to extract alpha from, from crypto capital markets, know how to manage the risks.

Yep.

And you really see it as a generational story. So probably the people that are heads of trading at these, at these firms, long only asset managers or hedge funds are, you know, my generation or older. And so they don't have kind of the natural digital native perspective that someone that's younger that are at these firms that, you know, that are really looking at crypto markets at the moment. We're seeing some people go into some of the traditional firms directly and getting hired in. But at the moment it's mostly not a balance sheet, not on their own balance sheets, but investing through other firms is the trend. But we're just seeing a tremendous amount of interest. It's hard to keep, it's hard to keep up at the moment. And I mean with obviously all the hectic activity here, you wouldn't know that we're in like a quote baby bear market. I think as well that hedge funds have been preparing for some time to come in to crypto, given the liquidity and the institutionalization of the space. And that's continuing.

Yeah, yeah, let's ignore that. This bear is right next to us. You know, it's still a bull market, right? I mean, yeah, let's, let's talk about that right now. So Florie Marquez, co founder of blockfi, said a couple of days ago that she's incredibly bullish long term on the crypto market. I'm going to assume that you have the same sentiment.

Absolutely.

Correct me if I'm wrong. What are the reasons to be bullish right now?

Sure, I think there's some short term bullish reasons and some long term bullish reasons. I think the short term bullish reasons are that crypto is the future right now. It's expressed mainly through some of the top coins like Bitcoin and Ethereum. Bitcoin is a defense against monetary inflation and so it should see money rotating into it as we see some of the inflationary data come in. And if you look at it from a generational standpoint as well, anyone that's kind of Gen Y or Gen Z doesn't say, oh, let me buy gold because there's been a hot inflation print, they're thinking themselves. I need to protect what I'm earning. I'm going to buy Bitcoin. It's really easy. I can buy it through Blockfi app or through another app. Yeah. So I think that's. And then Ethereum, there's kind of a structural, obviously a structural play going on with the merge coming up. And so that should also drive price action in the short term. In the long term, again, I think it's down to crypto can do everything. So it can fix the plumbing of the financial system worldwide. It can eliminate expensive fees from banks. Obviously Blockfi is a CEFI platform, but we're all about having a frictionless and inexpensive way to access financial services around the world. That's part of the international pivot, is let's give people in places that don't have easy access to say US dollar. We can give them access to stablecoins, we can give them access to loans. And so I think that there's so many different applications for crypto, whether it's NFTs or Web3 or just borrowing and lending derivatives that you'll find that there's a lot of reasons to be bullish.

Absolutely. Glad to hear it.

Yeah.

And so David, you're obviously an industry veteran or a tradfire traditional finance veteran with your experience at Credit Suisse amongst others. We've talked a bit about the institutional investment. Obviously sat in laborce, the former stock exchange is institutional or institutional interest is clearly here. Is institutional investment here?

Yeah, I think so. There was, there's an interesting Fidelity study that said that 70% of institutions plan to invest in crypto in the next year, 90% in the next five years.

Okay.

Yeah, I think it's. There's two things driving it. One is returns.

Okay.

Bitcoin, for example, has returned more than 100% on average over the last 10 years. Way more like I think if you look at equities over the same time period, it's probably low 10 somewhere 12%. So that's part of it. And it's just becoming too big in terms of mind share for people, people to ignore in terms of the liquidity, the infrastructure, the ability to earn outsized returns. We're in such an early market, it's really retail dominated. So for professional investors there are lots of investing opportunities.

But is there, or would you say is there a catalyst or some sort of acceleratory factor that's really going to get the institutions involved? Is it, you know, price action or is it regulatory? What's that? You know, missing link?

I Think that's a really, that's a really excellent question. Because what's missing right now is the predominant places where there's liquidity, those places do not have regulation. So the institutions don't feel 100% comfortable. And that's why as a, as a, as a company, we've always sought regulatory clarity. And that was of the ruling that we reach with the regulator. So now we're seeing retail participation somewhat level out. Volumes in crypto have been flat down to get the next wave of adoption and money come, big money coming into crypto and that equals price returns increasing. You need an institutional infrastructure, which means kyc, aml, which means financial transparency, cybersecurity, all the things they care about. Okay, I think we're going to see, and maybe some of your other interview guests will have alluded to this, we're going to see them making big moves to make sure that if not if they don't have regulation necessarily yet, they will have all the things that a regulator would require over the short term.

Yeah, yeah. I presume that's your biggest headache on a daily basis, right? This, you know, the regulatory clarity.

I think so. And it's what we're asking from our partners at the regulator and it's coming slowly and we just need to operate in a bit of. And we've gotten used to operating in a bit of a gray zone there, but we're really excited about the things that are growing on globally that the conversation has started and that it's being really taken seriously. For example, with Biden's executive order or some of the European regulation that's coming.

Fantastic. Well, David, it's a pleasure to speak to you today. We're really looking forward to seeing how BlockFi develop in this year, in 2022. Is there anything else you'd like to add before we sign out from here?

Sure. I think as a company, as I said, blockfi, we really want to expand our international business. We've just launched a lot more coins on the platform that people can check out. It's a very frictionless, easy to use turnkey way to earn interest on those coins and trade them. So I would just say check out your app if you're located outside the.

U.S. yeah, great way to finish. Thank you very much. My name is Jerry with Cointelegraph. Thank you very much.