While some investors are bothered by the thought of whether it’s too late to jump into the crypto niche, others suggest that the interest is only augmenting. Some of the biggest banks are putting their foot in crypto, suggesting that customers can both trade and invest (even if starting with as little as 1%) with the currency that was up to now regarded as highly ‘speculative’. Nowadays, the question is even being raised whether 401(k) is a good plan for crypto investment – in anticipation of future colossal growth.
Other popular things include investment in crypto stocks – the fractions of Bitcoin and other cryptocurrencies listed and purchasable via the stock market. Not only do they hold a promise of reducing risk, but also opening the door to crypto-sceptics who are now able to supplement their portfolio with no direct exposure to the underlying asset. The synergy between the stock market and crypto becomes increasingly appealing, not only for the sake of higher returns (some of which have already brought +4442.78% from the listing date) but also the chance of being hedged against volatility.
The cryptocurrency field also becomes more regulated. That said, if previously the investors could lurk their trading profits behind the scene, nowadays the disclosure became a compulsory step for participation in the economic system. Some of the regulated alternative banks, such as Revolut, have been expanding their investment portfolio to include a broader range of cryptocurrencies – currently about 40 – ending up calling 2021 ‘the year of crypto’. That all suggests that interest towards crypto, despite its outraging volatility, is not going to fade out in the near-coming future.
Looking for someone to share expert insight on the topic of crypto investing, I came across Raiden, the CEO of YDragon. In the course of our talk, I will try to uncover the underlying mechanisms of crypto portfolio investing, find an answer to what makes a crypto investment successful, and at the same time reveal more about the project itself.
First of all, how ambitious is the whole crypto project, according to your estimations? For example, will it be able to replace banks at any future date, or is it likely to encounter some roadblocks to do so?
We want to offer the crypto investor what the traditional finance investor has had for years if not decades - a way to minimize risk. Crypto market capitalization is constantly growing and by most expert’s estimation it is approaching a level where the majority of future growth will come from institutional players putting crypto on their balance sheets.
These include public companies and pension funds who are used to having the tools necessary to mitigate all sorts of investment risk. The crypto space currently isn’t mature enough to offer such tools, as most risk mitigation strategies are imported directly from the traditional finance world and rely on asset and fund managers to sift through the thousands of cryptocurrency projects around today, to be able to offer investors a sensible investment strategy.
We want to change that by using a combination of investor expertise to make initial decisions about the composition of a basket of assets, and smart contract convenience to maintain asset balancing and adapt to asset changes. Such an approach will not only be key in attracting and maintaining big money, but will be a welcome relief to retail investors who for the most part navigate the fields of crypto without the tools that institutions have imported.
Digital bank currencies vs cryptocurrencies – which one is your bet for the future?
Both in the near future, cryptocurrencies in the long run. CBDCs already serve as a gateway for crypto for a lot of people, but as is these people tend to gravitate towards what they know: central authorities with custody over their money. The status quo is comfortable but the cryptocurrency ethos revolves around self-custody and the power that comes with it. It might take generations, but I already see how today’s youth gravitates towards having total control over their finances. It’s only a matter of time before each one of us represents their own little bank.
At this moment, can we talk of crypto being able to support all clusters of the population – from the youngest to the oldest?
Like everything tech, adoption of blockchain and crypto is a slow rise, but a rise nonetheless. It’s hard to say whether or not the oldest segments of the population are well served as the demand from that demographic is noticeably smaller compared to the younger generations, and so it follows that the supply of solutions to their problems is also smaller. But that will change over time as the younger generations grow older.
If we draw parallels between investing in crypto or creating a portfolio of stocks, in which the former outplays the latter? And what is the risk one has to confront?
If we are strictly talking about the act of investing then adopters of crypto have enjoyed a much greater ROI year over year when compared to their traditional finance counterparts - it’s no secret that simply ‘hodling’ bitcoin for any period of a few years has been much more profitable than any other asset during that same time period.
While that may hold true for the foreseeable future, the fact remains that crypto assets are inherently more volatile due to lower liquidity spread out over different blockchains and exchanges, as well as being represented by a greater proportion of low market cap assets.
That, coupled with the lack of diversification tools available to the average investor, make for a very risky environment for anyone looking to park their hard-earned money and not think about it for a few years. This is precisely what YDragon aims to do: offer crypto investors of all walks of life the tools to minimize volatility and risk.
What is the key winning strategy for investing in cryptocurrency? From your perspective, what is more advantageous to bet on – short-term or long-term success?
The act of ‘investing’ usually suggests holding a position in an asset for long periods of time, years or sometimes decades. Because of crypto’s relatively young lifespan of a few years, and because the average lifespan of a given crypto project is roughly around a year, it’s difficult to come up with a reliable decades-long strategy based on the available data. If I had to guess, the most profitable strategy probably involves shifting funds around diligently from asset to asset, keeping a close eye on every project’s development. But again, one has to spend a lot of time and effort to maintain a healthy ROI - something that YDragon aims to solve by leveraging smart contracts and a panel of experts to do it for you.
What are the rising crypto and blockchain trends that can be interesting for anyone involved with crypto?
Every other week there’s a new trend. Whether that’s Defi, NFT’s, centralized exchange coins, gaming, memecoins, community coins, content creator coins, decentralized cloud storage, level-2 solutions, the list goes on. My advice to anyone is to diversify.
Warren Buffett is often quoted saying “diversification is a protection against ignorance.” Due to the volatile and ever-evolving nature of crypto, it makes very little sense to chase after trends - in all likelihood by the time you hear about it all the alpha has been sapped out of it. Just buy a little bit of as much as possible. We’ll make sure you get to do that as easily as possible.
Speaking about your portfolio – what is the average return an investor can expect generating with YDragon?
YDragon will launch with an index representing the best of what the Binance Smart Chain has to offer. It’s difficult to predict ROI given that we are not oracles of the future, but what I can tell you is that no matter what the return the index offers, an additional passive income will be available for users, generated through third party yield farming protocols that are available for these assets. So even if you are buying shares of our index in a bear market, you can expect a healthy return over time, courtesy of the ingenuity behind Defi.
Over time we will be rolling out more and more indexes to capture all kinds of niches in the crypto space, giving investors the opportunity to diversify even more. These could be indexes representing the best of all kinds of blockchain networks such as Avalanche, Matic, Cardano, Polkadot, Solana, Algorand, Ethereum. These could be indexes representing different segments of the market such as the best in NFTs, gaming, exchange tokens, privacy coins, storage, oracle projects, derivatives, sports, gambling, analytics.
These could be indexes representing different market capitalizations, short-term niches, algorithmic stable coin projects. The possibilities are endless and our protocol will allow for the constant rollout of new opportunities for diversification.
How does your platform manage to maintain the low cost of investing, and how these savings are matched against other players on the market?
The beauty of blockchain is that the cost of a single digital transaction is flat, no matter the size of the value being transferred. Be it for a dollar or a billion dollars, a stream of bytes is being ping-ponged around the network and benefits from a high level of security and speed.
But while that sounds great for the richest of the rich, for users that can only buy a few dollars of every asset these fees can represent a high percentage of losses that they need to make up for with return. Not only that, but a knowledgeable and diligent user wanting to keep a balanced portfolio will have to constantly shift assets around, paying fees along the way.
What the YDragon protocol does is optimize costs by pooling together funds from thousands of different users into one or fewer transactions, resulting in a much lower average cost to the user. Portfolio balances are also done in bulk. For a user wanting to participate in diversified investing, our YDragon indexes will have no competition.
Would you mind sharing with our readers the composition of your indexes?
The first index that YDragon will be launching with is called the B5 Top Reputable Projects on the Binance Smart Chain. It will consist of five assets considered by their communities to be the most trustworthy and active by their communities. These are: BNB, CAKE, BAKE, BIFI, and AUTO. Aside from being chosen for their individual successes these assets also have thriving yield farming protocols, allowing our investors to benefit from passive income.
Knowing about your native YDR token, how can investors benefit from governance control? What is your vision for the token – storage of value or tender of exchange?
The YDR token is at once a governance token and a utility token. Governance will be discussed when ready, but users can expect a high level of influence when it comes to building new or changing the existing composition of indexes. We definitely want to leverage the power of the many, as you never know what kind of geniuses prowl in anonymous communities that could potentially supercharge your project in directions you never thought possible.
On the utility side, the YDR token will be the only asset that will be present in every index, in addition to rewarding holders from every reward-generation channel that we have in the ecosystem. What this means is that the more indexes we operate with, the more YDR holders will benefit. Over time it will capture value from everything that we do at YDragon.