The journey from TradFi to CeFi to DeFi
Sophia Shluger at Amber Group is within family offices and institutions on their journey to gaining exposure to digital assets, roughly a $1tr market cap.
A divide exists between generations at institutions and family offices, and we need education because digital assets are a steep learning curve. Today’s crypto legend predicts family offices will allocate crypto or digital assets into their alternative asset portfolio. But for this to happen de facto, large private banks will have to acknowledge digital assets as an alternative asset class, which is something we’re not seeing uniformly yet. Here are some highlights.
The Legend: Bridging Tradfi, Cefi, and Defi
Amber Group is a unicorn, having raised 200m at a 3b valuation. While most cryptocurrencies are down 90% from ATH, Amber group has 3x’d their staff, from 400 employees to 1200 employees, with twelve offices across five continents. n.They’ve developed a digital assets gateway app, WhaleFin, a one-stop shop for secure liquidity, yields, and risk mitigation.
“7/10 of institutions recommend digital asset exposure.”
So says a Fidelity survey from last year. This precedes Fidelity’s recently released paper Bitcoin First, which boldly claims that Bitcoin is not a superior payment network, contrary to other cryptocurrencies and fintech, but a superior monetary good. No wonder they are now allowing retirement funds to make an allocation!
What Shluger recommends
Shluger cites this statistic and other reports – collated in Amber Groups Crypto 101 primer- to argue that “institutions are taking the time now to learn and try to understand the market… [employing] different financial models. [but overall if you] allocate about 100 to 250 basis points towards BTC. This high beta alternative asset. You’ll actually improve risk-adjusted returns by about the same amount of margin…But I think consistently seeing 2% allocation to crypto or BTC in particular as part of their alternative assets bucket makes a lot of sense. And I’ve spoken to many family offices that choose to get synthetic exposure via ETPs, 50 basis points in an overall portfolio.”
Current Battles: During crypto winters, the best get building
Despite the harsh crypto winter, Shluger was adamant that we’d see further innovations in the space. Those with the right stuff, she claimed, “focus, put their heads down, and get building [things like] scaling solutions, new layer ones, or the release or improvement of layer twos [as well as] cross-chain interoperability and zero-knowledge proofs.” Essentially, for what the industry aims to achieve in terms of universal solutions, Schluger continued, “transaction speeds are still [too]low.” So we need solutions that remedy this and a lot of the bottlenecks we [see], which will lead to universal adoption.
Concerning the diversity of technologies within the market, Schluger noted that the consensus is that digital identity is “imperative for how consumers navigate their Web 3 lifestyles. That’s…one of the benefits of decentralization…that it can help push that forward.” This fits the broader implications of digital assets as a whole, which are both “more efficient and more transparent,” Shluger said.
Fiat Republic: Ensuring efficiency and transparency
Moving forward to Web 3 is easier said than done. A core reason is a lack of trust, transparency, and various inefficiencies concerning the fiat access experience of platforms. Digital identity, digital assets, and Web 3 are all exciting prospects. However, we need institutions, family offices, and Trad fi to all trust and understand the process. This cannot happen without the basic standards of traditional Web 2 fintech platforms, let alone improvements upon them! Learn how Fiat Republic’s fiat-as-a-service platform is transparently and efficiently bridging the Web 2 and Web ecosystems.
Other Episodes:
Crypto Legends S1E8 – Bitcoin Suisse: Cryptocurrencies coming of age
Crypto Legends S1E7 – Future of Bitcoin and blockchain with Crypto OG Diana Biggs
Crypto Legends S1E5 – Archax
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