TradFi Sees Opportunity in Crypto Despite ‘Red Wedding,’ Burning Buildings

AUSTIN, Texas — Asset managers are salivating over opportunities in growth equity and depressed tokens that took an undeservingly excessive hit during crypto's bear market, market participants said during Wednesday's Consensus 2023 event.

Dawn Harflinger, CEO of Lili’uokalani Trust, and others who invest in the crypto sector offered a tone of optimism despite recent market destruction, which Harflinger equated with the famous bloodbath of the “Red Wedding” episode of the HBO series “Game of Thrones.”

Harflinger said she’s actually looking forward to running into the “burning buildings” of this market, specifically saying she’s excited to get additional exposure to secondaries, participating directly in the funding rounds of growth stage blockchain companies.

Read full coverage of Consensus 2023 here.

She shared a panel at Consensus with Matt Halstead, the director of real estate and digital assets for Texas Teachers, and Dan Tapiero, chief investment officer at 10T Holdings.

Halstead contended that digital assets are “an investment that has the potential to be integral to the future of technology,” emphasizing the broader impact of the innovations. Halstead also acknowledged both the volatility of digital assets along with their willingness to accept it, indicating that they have very little opinion on market timing.

“It’s not clear how the industry is going to evolve, but we think the future’s bright,” Halstead said. The overriding theme is the opportunity in digital assets is multi-faceted, he said, and that valuations – while in decline – are worth the gaining of exposure.

This message was echoed by others on the panel.

The digital asset ecosystem is broader and deeper than in the past, Tapiero said, and assets have lower correlations to bitcoin itself. Despite asserting that “I’m not hearing anyone say that bitcoin is going to zero,” he said the existence of uncorrelated digital assets gives institutions the opportunity to expand beyond bitcoin, such as investing in discounted altcoins and tokens.

Increased adoption of digital assets from traditional finance led to valuations being pushed to excessive levels, said Tapiero. Asset valuations from 10x to 12x revenue, were replaced by valuations of 50x to 100x. The resulting declines led to crypto winter being felt by a wider number of participants.

As valuations have come back in line, Tapiero argued the timing is promising for big returns.

“If you know what you like, and what kind of portfolio you want to build, it's the best time for crypto investing,” he said.