Bullish on Crypto, Bearish on Fiat

Nexo is pleased to have supported the second edition of the BlockDown Conference and to have had our Co-founder and Managing Partner, Antoni Trenchev, participate in an insightful fireside chat with Bloomberg’s Joanna Ossinger.

You can catch up on the highlights of the talk here:

• Nexo is experiencing double-digit percentage growth rates month on month.
• Nexo’s new product Earn on Crypto offers up to 5% interest on crypto and up to 10% on stablecoins and fiat.
• While previously users required guidance for crypto credits, today the user base has changed with clients expressing specific needs and demands.
• Compared to businesses relying on venture capital for liquidity, Nexo’s financing is self-sufficient providing stability through uncertain times ahead.
• Nexo will launch its own crypto exchange as a part of the upcoming Nexo 360⁰ offering.
• The digitized dollar is unlikely to appear earlier than five to ten years from now. Competition from China’s digital yuan might speed up this process.
• With the Fed’s extensive QE policy, a USD bear market is likely. Holding dollars today becomes a position meaning people are no longer safe in cash.
• The 8 trillion new dollars now in circulation all compete for the same finite amount of Bitcoin and are bound to push the cryptocurrency closer still to the $50K mark.

With the US dollar becoming progressively more at risk of inflation, Bitcoin’s likelihood to grow increases and so for the time being we remain bullish on crypto and bearish on fiat.

A preview and transcript of Antoni’s interview are available below. The full video is also available for free here.
It is set to be an exciting few months so keep following Nexo and the markets.

Transcript

Joanna Ossinger:
Thank you so much. Really appreciate it. So Antoni really excited to be talking to you. Maybe, do you just want to talk a little bit about what Nexo is doing, kind of what you guys are up to right now?

Antoni Trenchev:
Sure. I’m glad to be here as well. That was quite an intro. I’m truly humbled by it and it should really feel the same way. Well, what Nexo is doing, I hope that the majority of the crypto space is aware by now is we provide banking services to the blockchain space and we are quickly growing even beyond that. So as any lender would have it, our bread and butter is the lending business. And we provide crypto-backed loans where you have a bunch of crypto assets. You believe that they’re ultimately going much higher, so you can tap into our very efficient in many aspects, Instant Crypto Credit Lines, where you borrow against your crypto rather than sell it, which is great because you retain the upside potential. There are all sorts of tax aspects that optimize the experience for you in just about any aspect.

And then because we’re growing so fast and have been growing so fast for the past two years, we have to develop means of sustainably financing ourselves. And this is largely accomplished by our second product, which is the Earn product, which gives you the opportunity to earn up to 10% on a variety of different assets that vary from fiat currencies to digital assets. And it’s been a hell of a ride. We are experiencing double-digit percentage growth rates month on month, and just truly, truly exciting to be part of this financial revolution, nothing short of that.

Joanna Ossinger:
Okay. So where are you seeing a lot of that growth? I mean, double digits every month is, is pretty impressive. So where are the countries that you’re seeing it? What are the age groups? Can you talk about your audience?

Antoni Trenchev:
Sure. One of the great things of the crypto lending space is that it’s a great proxy to feel the pulse of the industry and the market. When people ask us where are your clients based? And the simple answer is everywhere. Just like Bitcoin is everywhere. It doesn’t have an office, it doesn’t have headquarters. So do our customers they’re truly everywhere apart from the, from the, you know, blacklisted countries and restricted countries, we have clients from every corner of the world, every age group we have from young adults, all the way to boomers who for some reason have chosen to put assets in digital form and to conduct business with us. So the demographic, it’s really, really diverse and we cover it all. Right now we’re seeing a great influx in both the retail part and the institutional side of things because institutional, for institutions, crypto got a huge endorsement by Paul Tudor Jones.

When you have the guy who put the word hedge in hedge funds endorse Bitcoin, and say they have an allocation of a few percent of their total assets on their management in Bitcoin, that gives them the additional boost of traditional institutions to come into the space. So we have quite heavily been onboarding with institutionals that up to very recently would not have their liking of Bitcoin. And now with this endorsement of Paul Tudor Jones, the timeline has shifted gears and it’s expanding very rapidly. But also the retail, the retail, we see new clients coming in through to the space, much like what would be happening in the traditional financial sectors, like with Robinhood, where you see even 10 and 12-year-old children playing around with stocks. I saw this tweet, the other day where a parent was complaining, rather the child is complaining to the parent and the parent was sharing that the child couldn’t play Fortnite anymore during trading hours because of all peers are trading on the platform, or this is quite excessive, what’s happening over there on the Robinhood platform.

So we see the retails, well, not necessarily children, coming into blockchain for various reasons. We don’t allow that, but we, we see all of this energy coming in and proliferating into a blockchain space minus the front rank, we don’t the front rank, we don’t sell your data to hedge funds to profit of what should be a free service.

Joanna Ossinger:
Hmm. Okay. Um, so how do you work to provide products and services that are of good quality? I think there are a lot of products out there. And so how do you make sure that it’s really top notch?

Antoni Trenchev:
Right. Well, this has largely also to do with our background, like the core team that founded next. So we have collectively been in the FinTech space even before the term FinTech was coined there are other companies that we have founded and successfully navigated through the murky water itself, financial innovation. So we have been around for more than 13 years now. So this is exactly what we have been doing, facilitating credit online, and a lot of players coming into the space, they think “Oh this is really simple, you just get money from one party and then lend it on to another one at the higher interest rate. So what could possibly go wrong?” Well, a whole set of things could possibly go wrong, and it’s not so easy if you want to have a smooth, seamless, fully automated experience as you have with Nexo.

Just, just about any aspect of our business is fully automated. And this also has to do with the customer culture by now, everyone wants everything to be instant. That’s why blockchain is so great. You could send a million dollars from London to Sydney in a matter of minutes for a fraction of the cost, it will cost you via a Swift transfer, which could be 0.5% of the total value. It takes seven days to settle. So we are in the business and have been in the business for quite a while of facilitating, automating processes, very consumer-centric and user-friendly ones. But I think the more important part of your question how do we make a great product if I think it fundamentally touches upon the idea of building a sustainable business that makes business sense on its own.

I am a skeptical person by nature, and if something appears to be too good to be true, it usually is. And if somebody is willing to pay me something and I don’t understand how they are going to make the money to actually pay me, I wouldn’t be comfortable putting more than a few hundred dollars with them. We have grown the confidence in our product and the brand to such a level that we have people with double-digit million amounts trusting us with their funds. So it goes back to the sustainability of the model and that it all makes sense, it’s a model as old as the world — secured lending.

Joanna Ossinger:
Okay. So what’s a product in the space that isn’t developed by you, but you wish you’d developed or what’s something that you think is really interesting.

Antoni Trenchev:
Right, that’s a very good question. Very tough one to answer because when we see something out there that is good, we try and see how we implement that into our offering. Right now we’re working on what we have coined, a Nexo 360-degrees offering where we’re trying to cater to every need, any possible need that a person exposed to the blockchain spce and seeking exposure to it would like to see, to have it all in one platform. So when we see something great we try and figure out ways how to implement that part of the offering. I’ve been always fascinated by the crypto exchanges. Um, I think that you have a great number of very decent products, but they there’s still room for improvement. They’re not necessarily the top notch quality level of the product that you see in some of the traditional markets.

So this is one thing I wish we had developed earlier, the ability to offer the crypto exchanging side of the business in a very automated, very intuitive, very efficient way to our customers. Needless to say, since we like it, we are working on it so sooner, rather than later, this will be available on the platform. I think the derivatives market and you Joanna having sort of a background in reporting on derivatives and complex structured products, this has got us pretty excited. We are on a hiring spree here for the OTC desk and that helps facilitate different products because the, the profile of the client has changed. Whereas one and a half years ago, you had to walk people through what a crypto-backed loan was, now they have very specific needs and they come to you and they say, Hey, I’m a miner, I have this cashflow calculated — cashflow or future cash flow in Bitcoin — how would your offering, apart from the loans help me optimize my expenses, my costs? How do I manage risk accordingly? Can you offer me some insurance products where I can pay a certain amount of premium and structure my finances better?

So we see a whole bunch of different requests that go in that direction. Still, the clients have very specific needs, and we’re constantly on the lookout to meet those. And again, most sophisticated, it shows you the maturity of the space that is coming about. And we are constantly on the lookout for. But just to answer your question quick and concise, the crypto exchange business is very interesting to me. I wish we had tapped into it earlier, still doing that. And the structured products and derivatives market is a very fertile land to be developed in the next months and years to come.

Joanna Ossinger:
Interesting. Okay. So what do you see is key from taking something from say a subsidized funded product into something that makes money?

Antoni Trenchev:
Yeah, I mean, it’s tough because the past 10 years we have been in a perpetual bull market, and then the way businesses go about developing products has been done in a certain way, which I think, what I sometimes lose sleep over is that it might stop once the presidential election is behind us, because what we’ve seen essentially is subsidized products. Yes, great products. You know, everybody loves Uber, how clean the car is, how cost efficient it is, how quickly the driver arrives and all the reasons why we love Uber. The offering of WeWork, yes, incredible right up to a certain point, at least. And then like products like Monzo or Revolut, which have developed something that you think, why hasn’t anyone done it before that you get the free card, free FX, exchanges, you don’t lose, don’t pay money on anything.

And this is all great from a consumer perspective, but ultimately there’s no such thing as a free lunch. And this only goes well, as long as they can keep on getting the cheap liquidity, the VC investments for them to essentially subsidize the product that they’re providing. It’s in the form of actual free money for you to spend or a product, which you will have to spend a series of amounts of money to actually obtain. And this has got me worried because now I think that we are closer to the end of the business cycle than to the beginning. And you know, we are in the presidential election year, obviously there has been very strong signals that the executive branch would not like the equity markets or market really to be anywhere near a correction mode that. Has set us on a dangerous path where the executive branch tries to influence what’s supposed to be impartial policy.

This is very dangerous because it’s unprecedented and once that cat is out of the bag, you know, there is this genie you can put back in the bottle, so to speak. So really, really dangerous here. And at Nexo we opted for the other way. We have a traditional very conservative approach of money-making where it has to make sense. There has to be very little to no counterparty risk. That’s why we have refused uncollateralized business, where you have certain providers taking Bitcoin and other assets from the general public, and then expanding it, extending it to other players, which they claim are credit worthy, for whatever reasons they see, on an uncollateralized basis, essentially IOUs. And it’s a game of musical chairs, and it goes well until the music stops or until we have a major fraud. And this is something that really has me worried.

Joanna Ossinger:
Okay. Interesting. So since you talked a little bit about the Fed, so, going onto central bank, digital currencies, what do you think of them in general? And do you think they’re a threat to the crypto industry?

Antoni Trenchev:
Well, not an immediate threat that’s for sure. I think that a lot of the banks, the central banks, they’re just playing around with the concept. If you follow Jay Powells, a press conference, I think it was the other day: He was like, he wouldn’t give you a straight answer. He said, yes, this has to be looked into and much more research is needed in order to evaluate the pros and cons. And it ultimately goes back to what I think of government-led initiatives as a whole, for disclosure and more on these days. So I do think that the government is not the best market participant. They should stay out of these things that obviously with the creation of money is somewhat different but suffice to say, I don’t think we will see very quickly the Fed moving on that.

I think the only viable option for seeing a digitized dollar, which I am ultimately convinced, we’re going to see five to ten years from now. And it’s just going to be due to popular demand. The settlements of Swift, where it takes you forever to receive a transaction. And it is so expensive and the overall war on cash, which nobody can deny has been happening for quite a while now. And exacerbated by the COVID where nobody even wants to touch paper, money, and any more banknotes. In addition to the policy of negative interest rates only works. If your money’s in the bank account, if you have it under your mattress, they can charge negative interest rates on that. So all this put together, I’m pretty confident, we’re going to see a digital dollar at some point. It’s just that I don’t believe it’s going to happen that quick. The only thing that can speed this up is if the United States has to play catch up with, I don’t know, for instance, China, who’ve been very vocal with what they’re doing and putting the actual work into developing the digitized yuan.
So I personally thought that the US response would come through Libra. From the last conference that I watched of Jay Powell it would appear that he says that private participants in private companies have no job in intervening in the money creation business, which is quite curious, given the fact that commercial banks, like fractional reserve banking have actually enlarged the money supply for quite a few years now, but you know, the direction they’re taking, they’re going to develop a digitized dollar. But I think that the only thing that could speed up the timeline here is if we see radical moves from China and the US being forced to play catch up.

Joanna Ossinger:
Hmm. Okay. Yeah, that makes sense. So just overall in the regulatory environment, do you see anything changing or progressing globally or in specific countries? And what do you think are the best countries for crypto in terms of regulation?

Antoni Trenchev:
Well, just like crypto, isn’t confined to a specific country for it to exist, the blockchain network is decentralized. I think that companies should go about building businesses in the same way. And this has manifested itself in so many ways from, you know, home offices and decentralized headquarters. We, at Nexo have people working from just about anywhere. So I think that, um, is the right way to structure companies. And I am not very optimistic on, you know, regulatory frameworks in the traditional sense of the world where you could be, I don’t know, in the Bermudas or Switzerland or Malta, and just stay out of there and do business globally because your customer base is global. And there’s this very complex notion of how you service that.

The way we have tackled that is that we feel that compliance is very important for the safety of our entity as such from regulatory scrutiny, but also for the clients and building trust. So we have gone about solving this problem in the traditional ways we are on a license acquisition crusade. We have a very dedicated, very capable team of legal professionals, and we acquire the same licenses that any FinTech, any business in the financial sector worldwide, you know, money, transmission licenses in US payment institutions, in Europe, the different licenses that have been developed for crypto exchanges and obviously the credit licenses for the facilitation of credit. And it’s no secret that we have been working for quite a while on acquiring commercial banking capabilities. And I’m pretty excited about the upcoming announcements that more likely than not, we will have the pleasure of conveying to the public, but to answer your question, I don’t think that any one country excels at crypto legislation, I think there was a build up momentum, mostly driven because of the ICO boom, and bust that we saw, and a lot of fraud that was facilitated. But now I think the regulators have slowed down the part from the anti-money laundering mechanisms, which the financial action task force has prescribed, that individual countries have now to implement. But apart from that, I think we’ve lost momentum. And for those companies that want to be serious in the space, they should just have to acquire the traditional licenses that any financial institution and any financial company would have to.

Joanna Ossinger:
Okay. Now I definitely want to get to this part. So you’ve been pretty bullish on Bitcoin generally. And you know, it’s hovering under 9,500 right now. So are you changing your view? Is it going to take longer than you thought for it to start to go up significantly? Or do you still think that there’s potential for that this year and say next year?

Antoni Trenchev:
Well, if I only had a crystal ball, I wouldn’t be doing anything else, but speculating on the markets, but I think that on the fundamental side, Bitcoin is stronger than ever. And this has again manifested itself in so many ways, just from a pure price action point of view. It has outperformed just about any market — the S&P is down, I think, 10% here today. Bitcoin is up 30%, gold is performing very well, but Bitcoin has outperformed even than that. I think the fundamentals of this excessive supply of cheap funding at even the slightest hint of market correction, it just pours water into the case of Bitcoin being there to stay and getting momentum on the fundamental side, because you have something that is hard-coded and finite, you can’t change that. You can’t have POTUS tweeting out that the money supply the total number of Bitcoin should be expanded from 21 million that’s all theBitcoin there’s ever going to be, to, I don’t know, 200 million or whatever. You just can have that. Bitcoin is this perfect structure, which has all the right principles. And those once formulated, stipulated, put into code, they remain unchanged of any human intervention. Yes, of course, they’re building the network, but the really important parts of there only being a finite amount and not exceeding that under any circumstances, the human decision factor to change that has been taken out from the equation.

And in that sense, I think this is what has driven so many people, both from the retail and institutional side to it. And truth be told it’s the only free market because you have dollars, you have everyone has a certain amount of dollars, and now you are competing with almost $8 trillion more since mid-March for the same amounts of finite goods. I think that there’s just no case that this isn’t good for both gold, but more importantly Bitcoin.

So yes, I’m sticking to my prediction of 50K until the end of the year. I appreciate that it is a bold statement, but the fundamentals are there and the momentum is shifting there as well.

Joanna Ossinger:
Okay. Are there any other assets crypto or otherwise that you’re really bullish or bearish about right now?

Antoni Trenchev:
Well, bearish on the dollar this is one of the messages that we try to get to across, to as many people as possible with this Fed policy of QE eternity, quantitative easing until eternity, being in dollars is a position as well. This is not the sixties and the seventies where you had the gold standard up to a certain point and then, you know, “I’m bearish on stocks”, so I’m safe in cash. You’re not saving cash anymore, this represents a position that gets flooded by the central banks of the world.

So bearish on any field currency really, bullish on crypto, predominantly Bitcoin is just turning into a maximalist, slowly but surely gold, and, you know, truth be told good quality names and any hard asset, really. And that will include some of the stocks that have strong, fundamentals and whatever might come in a recession-like scenario, there will be companies after that, as they say, bulls climb up ladders, bears jumped out of the window. It’s quick when it happens, but ultimately it’s short lived because if you look on a large enough logarithmic scale, you can see that we are in a perpetual bull market. So, you know, people shouldn’t fear corrections, but rather see them as opportunities. So, you know, the right timing on good stocks could also be a very good plan here.

Chris Dawe:
Hey guys, this is absolutely fantastic. First of all, I’d like to say I’m bullish on Nexo. Uh, that’s for sure. Joanna and Antoni, thank you very, very much that was an incredible way to kick things off. Rght now we have a massive audience that’s joining us all over the world. And they also have a bunch of questions, way too many questions to get through, but if it’s okay, Antoni, I’d like to go to some of the questions of our audience.

Antoni Trenchev:
Absolutely. Let’s do it.

Chris Dawe:
All right. So we have Andreas, he says: Does Nexo’s Antoni believe that they will be able to sustain the high level of interest for customers on Earn?

Antoni Trenchev:
Absolutely. We have actually expanded the Еаrn offering up until recently. You could earn аn interest of 8% on stablecoins and fiat currencies. As of this week. You can also earn with Nexo on crypto assets, such as Litecoin, Ripple, XRP, EOS, a bunch of them Bitcoin and ETH are coming in the next few weeks and we have actually bumped up the percentage, the interest rates that you’re getting from 8% to 10%. And we do believe that with the organic growth of Nexo’s loan book, which is happening on many fronts. The Nexo token holders will experience that in a certain way very soon. But yes, everything is growing organically. We are growing the product itself and this has been due to requests of the community. So I am not worried on the interest side at all. Um, we will see huge an influx of clients and we are in a perfect position to just meet their requirements in every aspect,.and continue to run a profitable, sustainable business model.

Chris Dawe:
Bang. So there you have it incredibly great answer and very encouraging. Another question we have Omar who has asked 150 questions himself. He’s obviously following the project very closely. I will get to one of his questions: Will Nexo have a crypto exchange in 2020?

Antoni Trenchev:
Well, I don’t want to give a specific timeframe. So I’m going to half answer the question and half leave that for another time. Yes, definitely. We’re going to have crypto exchange capabilities on the Nexo platform that is certain. I am very confident it is going to be within this year, probably even sooner, but I don’t want to put a deadline here because we like to keep deadlines and not bound ourselves by them. But definitely this has been a request from the community and as with any new product, we first tried to address those that are recurring and that are in most demand from our clients and customers.

Chris Dawe:
Super it’s good to manage expectations and not put yourself under too much pressure. I know that for sure, running my own business as well. The next question, and very real relative to growing and building a business, which is an incredibly hard thing to do. One question that I really like : In terms of employees over the last year, how much have you grown in terms of employees joining your team?

Antoni Trenchev:
Yeah. Well, it’s almost funny looking back, like when we started Nexo and we said “yeah, we don’t think we would ever be more than 20, 24 people tops.” Right now we are more than a hundred and we continue hiring. We had to move offices. It’s like this enterprise growth organically, great team, shout out to the team. They’re doing an incredible job across the board. We are constantly recruiting and this is not just confined to the office space. We have people working from everywhere. We have people that are almost employees of Nexo working, working by third party arrangements. So the core team is a hundred and something right now growing almost daily.

Chris Dawe:
Awesome. So you’d always need your core business associates, especially your partners and your founders, and some of the close members of the team you’re truly distributed, which I think is the way, you know, businesses will certainly look like in the future. This is just a question from my myself: Do you ever predict that you may introduce or incorporate a decentralized autonomous organization structure for Nexo?

Antoni Trenchev:
Well, we are close to that. Like, yes, we have people in the office. We have people working from, you know, the past two months working from the confines of their homes, but they could just as well be working out of a Starbucks from every corner of the world where there’s internet connection. And I think that’s what the future will look like, because we saw Mark Zuckerberg saying that up to 85% of people might not even have to come back to the company headquarters and continue to do work. I think it was a paradigm shift in many aspects, and it’s about structuring the right processes so that who does what, what’s the chain of command, what are the vertical center horizontals, and how do you manage and achieve the KPIs? And there’s no reason why it should be confined to any particular space or a place of doing business. So obviously it’s going to be a lengthier process because it has to be managed, right. But I definitely see a world where decentralized teams and structures take an ever more important role in a company’s set up.

Chris Dawe:
That sounds fantastic. Yeah. I think we can all move to more desirable places. Maybe these big cities have become very big and might be nice to sit on the beach and do some work from there. The digital world is so easy to do that with our organization as well. And with BlockDown here, we’re doing these conferences and really including global people. Listen Antoni and Joanna, thank you very, very much for this. It was an incredible fireside to kick things off. I know the fan base behind Nexo is absolutely huge worldwide, but also in the BlockDown community. So thank you both very, very much.

Joanna Ossinger:
Thank you. I appreciate it.

Antoni Trenchev:
Thank you so much.

Chris Dawe:
Awesome. Right on. Okay guys. So we’re going to go to a very short break and then we’re going to be back for our first panel. That’s relative to COVID-19. So I’ll see you back here in just a few moments.