This publication talks to the founder and CEO of a fintech firm based in the UK that says it is bringing the savvy and insights of investment banking and fund management into the world of bitcoin and other digital assets.
There’s never a dull moment with bitcoin. Surging more than tenfold in price over the past year to more than $64,000 per coin last week, the US stock listing of Coinbase proved a success and added to a busy period for IPOs. But then the digital currency slumped by almost 15 per cent yesterday. Reports said the slide appeared to be hit by reports that the US Treasury is planning to deal with financial institutions which have used cryptos for money laundering.
When there’s such tumult in what is still a relatively young market, the emotional tug-of-war between greed and fear is unusually acute (remember how it felt during the 1990s dotcom era?). A person who is intrigued by digital assets but who doesn’t want to stare at a computer screen all day might prefer to give his or her risk tolerances to an expert manager and let the latter press the buttons. And this is where a business such as UK-based SupraFin comes in.
Founded by Liliana Reasor, an investment and risk management veteran working for bulge bracket banks such as Morgan Stanley, Bank of America, Deutsche Bank and JP Morgan, SupraFin is a platform through which investment managers can oversee an estimated universe of more than 3,000 cryptocurrencies. Clients who sign up are encouraged to hold a diversified portfolio and rebalance it when large price movements shift the asset allocation. This is textbook money management discipline. Clients pay an upfront platform fee, based on the size of the portfolio, and can invest from as little as £300 ($415). There are no liquidity constraints and redemption notice requirements, Reasor told this news service in an interview.
Reasor was blunt about the risks involved.
“The major risk is choosing cryptocurrencies that won’t make it. Another major risk is market risk as market volatility of some cryptocurrencies range from 25 per cent to 250 per cent daily annualised volatility,” she said.
“We need a platform to help people navigate this space because there are more than 3,000 cryptocurrencies currently trading.”
The SupraFin platform held its soft launch in November last year and Reasor said she has been approached by UK independent financial advisors and private wealth managers. The platform can be white-labelled or offered through APIs for advisors, private wealth mangers, or digital platforms, she said. The business arrives at a time when large institutions such as JP Morgan, Julius Baer, BNY Mellon, Goldman Sachs and Guggenheim Partners are pushing into the space.
Specialist crypto investment houses such as Nickel Digital Asset Management argue that, if handled with discipline, digital assets can enhance risk-adjusted returns. The area isn’t just for eccentrics any more.
Reasor argued that the total volume of cryptocurrencies is not finite - a point that might surprise those who are told they are like the digital equivalents of gold. “What makes cryptocurrencies valuable is not that they are finite. For example a lot people say that bitcoin is finite because bitcoin’s maximum supply is 21 million bitcoins. However, bitcoin has had more than 44 forks, which have created other cryptocurrencies (e.g. Bitcoin Cash, Bitcoin SV, Bitcoin Gold, etc) and which were given to holders of bitcoin; hence this is why I will not call this finite. Then there are other cryptocurrencies like Ethereum that do not have a limited supply.”
(A cryptocurrency “fork” is an update to the software governing the distributed network that makes existing rules either valid or invalid - sometimes resulting in spinoff versions of bitcoin.)
As there are more than 3,000 cryptocurrencies, Reasor’s approach to cryptocurrencies is to assess first what types they are (e.g., exchange tokens, utility tokens, stable tokens, security tokens, etc.) and then, based on the type, use the appropriate proprietary investment framework to do some sort of relative value analysis and select the best cryptocurrencies. For example, for exchange tokens like bitcoin, she thinks their value derives from their underlying technology, which offers a payment network parallel to the conventional banking system.
The SupraFin platform recommends a diversified portfolio of cryptocurrencies for people, based on their specific risk preferences. Then people can modify or buy the recommended portfolio at a click of a button as the SupraFin platform is integrated with cryptocurrency exchanges, which do the trading on the background. On a periodic basis, customers get an automatic alert if the platform determines that, in order to stay within the target risk of the portfolio, it is necessary to rebalance because risks may have changed. This means that investors don’t have to micro-manage specific digital assets, but can outsource this to the SupraFin platform.
Reasor is confident that the whole digital assets space is just starting.
“In the next five years we will see a larger adoption of cryptocurrencies in their native form, where for example exchange tokens will be more heavily used for payments through their respective blockchains (e.g., Litecoin used for payments in the Litecoin network). I also expect to see some sort of utility tokens used by all types of companies globally to raise capital. Finally, we will see security tokens or hybrid tokens play a bigger role, as part of the cryptocurrency ecosystem,” she said.
Reasor has been involved in the space for the past six years. “I got involved in fintech in 2015 because I saw a trend towards digitalisation of financial services back then,” she said. Reasor became more interested in the cryptocurrencies area in 2017 and realised the full extent of what the market was capable of. This encouraged her to build SupraFin.
There was a “soft launch” to the platform in November 2020, when some few high net worth individuals tested the SupraFin app and invested through the app. All have seen their crypto portfolio increase by approximately 700 per cent since then. Hence, SupraFin’s recommended crypto portfolios based on their proprietary investment models have had a great start.
Part of what SupraFin does is provide education, hosts videos and other resources so that people can learn more about cryptocurrencies and understand the benefits of leveraging technology to invest like professionals. And it has kept Reasor busy: she’s spoken at more than 35 fintech and crypto/blockchain events and is often invited as a cryptocurrencies and blockchain speaker by Carnegie Mellon University in the US to broaden knowledge about the subject.
So far, the reception to SupraFin has been very positive from the investment market, she said.
Besides its UK base, SupraFin has nine team members and five advisors who work from the UK, the US, India, and Germany. Although its first and current target market for customer acquisition is the UK, Reasor sees her next major markets as being in the US and Asia.