The partner at a VC firm backing OYO, ShareChat and Epic Games explains why it’s betting big money on crypto ⁠— and he’s not alone

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The partner at a VC firm backing OYO, ShareChat and Epic Games explains why it’s betting big money on crypto ⁠— and he’s not alone
Image by Sergei Tokmakov Terms.Law from Pixabay
  • Crypto — not stocks — is going to be the asset-class of choice, Lightspeed Ventures said.
  • Lightspeed is not alone. Business Insider spoke to a few other VC firms like Pi Ventures and Speciale Invest to understand the rationale for big money chasing crypto.
  • Big investors with $100 trillion of capital are getting into cryptocurrency, according to a Bloomberg report dated November 13.
  • Check out the latest news and trends in cryptocurrencies on Business Insider.
At a time when the bigger part of the investment community is still cautious, US-based venture capital firm Lightspeed — whose popular investments include OYO, ShareChat and Epic Games — says crypto, not stocks, is going to be the asset-class of choice for the new-to-investing millennials in India and South East Asian markets.

Lightspeed has already invested multi-million in blockchain technology, including cryptocurrencies, like FTX, Wintermute, Zerion, DeversiFi and Blockchain.com as of August 2021. “There is a lot more fiat (currency) that is outside of crypto entering crypto so yields in crypto are likely to stay high for the foreseeable future, and that might mean that for the foreseeable future, those that look for high yields — often the younger investors — will gravitate to crypto,” Hemant Mohapatra, partner at Lightspeed, told Business Insider.

The venture capital firm believes that the high rate of interest, coupled with crypto regulation being a part of mainstream politics, are just a couple of factors that are going to attract more investors towards this value creation opportunity.

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“In India as well, years of regulatory pushback has begun to ease off, starting with the Supreme Court of India overturning a prior directive by the Reserve Bank of India (RBI) prohibiting banks from dealing with cryptocurrencies,” Hemant Mohapatra, partner at Lightspeed, said in a blog post.

ALSO WATCH: Crypto is crying for regulation because the ads are misleading


Lightspeed is not alone in being bullish about crypto

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According to a report published by Bloomberg on November 13, institutional investors with a capital of $100 trillion are interested in investing in crypto.

Global cryptocurrency monthly trading volumes have also significantly increased in 2021, growing from $271 billion in June quarter of 2020 during the first wave of covid to $2.2 trillion in May 2021. An advertisement by Indian Crypto exchanges, launched in November 2021, said that Indians have ₹6 lakh crore invested in cryptocurrencies triggering a spate of social media conversations on the topic of their legitimacy.

The partner at a VC firm backing OYO, ShareChat and Epic Games explains why it’s betting big money on crypto ⁠— and he’s not alone
BI India

The craze of crypto currencies is also imminent in India, as one in six urban Indians intend to invest in these virtual tokes in the next six months, according to a consumer research firm Kantar.
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This has the potential to eat into the larger investment pie according to Shubham Sandeep, principal at investment firm Pi Ventures (known for backing startups like Locus, Agnikul and Google-backed Wysa). This cannot be defined as a capital outflow but more like an opportunity lost for equity investments.

“The last generation wanted to invest in real estate, then came the generation of 90s-2010s when their investments went into equity and over the next 10-20 years, the upcoming generation will get their first exposure on investment through crypto,” Sandeep added. He noted that investments are not being diverted from equity to crypto as of now.

The volatility of the crypto market has allowed investors to maximise their profits from this underregulated segment. It is also getting much earlier to use these virtual currencies for varied uses. “But it is not for the faint hearted,” Sarabjot Singh Anand, director of computer science and engineering at School of Engineering and Technology, adds.
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CompaniesPercentage growth in 2021 to date
Bitcoin127.7%
Ethereum 555%
Binance Coin1628%
Solana53%
Cardano1,071%
Doge4,614.22%

The market still has a long way to go, Avinash Shekhar, co-CEO of ZebPay and a member of Blockchain and Crypto Assets Council (BACC), noted.

The remarkable growth and returns of cryptocurrencies is the major reason why $8 billion was invested in this crypto and blockchain domain in 2021 so far. Indian companies — CoinDCX, Coinswitch Kuber and others — have raised half a billion dollars this year as well.

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CompanyFundraiseInvestors
FTX$900 millionParadigm, Sequoia Capital, Ribbit Capital
Circle$440 million Fidelity Management and Research Company, Marshall Wace, Digital Currency Group
Ledger$380 million10T Holdings, Cathay Innovation, Draper Esprit, Draper Associates, Draper Dragon, DCG
BlockFi$350 millionBain Capital Ventures, partners of DST Global, Pomp Investments, Tiger Global
Solana Labs$314 millionAndreessen Horowitz, Polychain Capital, Alameda Research

“Cryptocurrencies undoubtedly have the potential to give high returns, but as they say, there is no free lunch. So the high returns come with greater risk.... I personally feel that crypto will become part of most institutional and individual portfolios which will see money flowing out of stocks but stocks will continue to remain an important part of any portfolio,” he added.

Regulation is not necessarily a bad thing

The India Parliament is reportedly planning to debate a new bill on the cryptocurrency bill in the Winter Session. You can read the highlights of what the bill is likely to propose here.

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“Government has pulled back from a blanket ban and we do expect, and welcome, thoughtful regulation to bring crypto safely and broadly to the masses in ways that allows the benefits of crypto to see into tradfi [Traditional Finance] and avoids the common pitfalls and risks that this emerging ecosystem presents,” Mohapatra said.

Arjun Rao of Speciale Invest — an investor in The ePlane Company, RocketLane and others — echoed the same, highlighting there is a greater scope of innovation in crypto as well. “We expect more innovation in crypto and conducive regulation to be the main drivers of increase in crypto investing in the coming years, the impact of macro economic trends (like rise in inflation) is harder to predict,” he told Business Insider.

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