Horacio sat down with Alexander Valtingojer, Co-founder and CEO of Coinpanion. Coinpanion is an investment platform based in Austria offering different cryptocurrency portfolios curated for a range of risk tolerances. Coinpanion uses a dynamic asset allocation framework to build their CO2-neutral portfolios with weekly rebalancing.
The portfolios currently have more than 60 million Euros under management. This is a great conversation on how a founder built his investment platform and the logic behind its structure.
For our listeners in Europe! Coinpanion is offering a credit of 20 Euros when you fund a portfolio with a minimum 50 Euros on the platform. Make sure to use the Coupon Code: ALTS20.
Discussion topics include:
- Trading game keys on Steam and getting paid in bitcoin in high school
- Shifting crypto earnings from gaming into ETFs
- Overview of Coinpanion as a passive asset portfolio
- Bitcoin as a scarce digital asset and digital gold
- Copy trading as a riskier form of investing in assets
- Investing with long-term potential in mind
- The portfolios and risk tolerances offered by Coinpanion
- Using data-driven systems to analyze cryptocurrencies
- The fundamentals behind the Coinpanion Crypto Score
- Rebalancing portfolios based on risk parameters
- The NFT and Metaverse Portfolio
- Describing cryptocurrencies as a risky asset class with potential for big rewards
- Defining risk with different metrics
- Creating CO2-neutral portfolios
- Using an increased amount of energy in the short-term to build a better long-term financial system
- Comparing the European cryptocurrency market to the American and Asian markets
- The future of the NFT economy
You can listen to the podcast through Spotify or YouTube.
[Horacio Ruiz]
Welcome back to the Alts Podcast. I’m your host, Horacio Ruiz. We bring you industry leaders and creators to give their insights on the rapidly changing and exciting world of alternative assets. Opinions expressed on this podcast by the host and podcast guests are for informational purposes only and should not be considered investment advice. Podcast hosts and guests may maintain positions in the offerings discussed in this podcast.
Today’s guest is Alexander Valtingojer, co-founder and CEO of Coinpanion. Coinpanion is an investment platform based in Austria, offering different cryptocurrency portfolios that range in risk, from cautious to adventurous. I think you’ll be impressed with how much thought and data goes into Coinpanion’s offerings and Alex’s journey from using Bitcoin while in high school, to now leading a cryptocurrency investment platform. Let’s jump in.
All right. Today’s guest is Alex from Coinpanion. He’s the co-founder and CEO of Coinpanion, which is an investment platform for crypto portfolios. Alex, thank you for joining us today.
[Alex Valtingojer]
Yeah. Happy to be here.
[Horacio Ruiz]
When I was researching your company, I noticed all these different portfolios, and I noticed that there’s different offerings. You have risky ones. You have some that are a little bit more [inaudible 00:01:27] safe, and I was really interested in that. But more so than anything, I wanted to start with your interest in cryptocurrency and then how you moved up to becoming this co-founder and a CEO of your own investment platform.
[Alex Valtingojer]
Yeah. It’s actually a long story how I started with crypto. Actually, started trading game keys on Steam. You probably know that gaming platform for basic Counter Strike, Dota 2, et cetera, et cetera. I started trading game keys in high school. I was 16. It was 2015, something like that. During the course of my trading activity, the different forums, I sometimes got paid in Bitcoin. I would say that was the point where I started to get redpilled in crypto.
In the course of my studies with that back pocket of Bitcoin, it started really going up in 2017. I mean, that was the first crypto market explosion, I would say, especially for the early investors. I was suddenly like, “Oh, wow. I made some money in crypto and I’m 19. What should I do with the money?”
Then I started researching different investing products. I got really hooked up with stocks, so I read some good books. Basically, in the end, stumbled up on ETFs, so the passive product for stock investing. I got super interested in it because it was like, oh, I’m not that much into really researching what is going on on the market. But I definitely want to allocate my money in high-yield products. I want to gain all the long-term profits.
I started shifting a significant part of my crypto earnings into ETFs. But because I also have a technical background, so I did tech in high school, I freelanced a lot as a rep developer, was really keen on also having some exposure in digital assets. On one hand I understood, okay, it just makes sense to automate middle mans, which is basically what smart contracts are doing. And that there’s a lot of sense in digital ownership, digital transferability, and digital uniqueness. So, I wanted to have some exposure in that space.
That was slowly the beginning of the company with Matthias, Aaron, and Saad, my three co-founders. We started exploring possibilities, how can you make a passive investment product in a cryptocurrency space? Initially, we tried around with copy trading. Found out the copy trading is let’s call it just a bit more a fancy way of gambling because you basically follow some random people which do some random trades. You don’t know how much risk to take. You don’t know why they invest in a specific currency.
You don’t know what to do when they’re on vacation. Are they still keeping the positions? Are they selling it? So, it’s pretty untransparent. But this was the start of Coinpanion becoming this asset management company. I would say now we’re at this point where we are basically this ETF-like solution for digital asset investing. As you said before correctly, it’s like we have these three portfolios, which are risk based or for the everyday investor who just wants to start investing in crypto, so a Cautious one, a Balanced one, and more Adventurous one.
But are going now more niche. So, we also offer products for Metaverse focus, NFT focus, DeFi focus, and are trying to slowly build up our product line to also offer exposure to NFT products like actual NFTs, for example, digital art, gaming items, virtual land, and also going into more DeFi products like yield farming or staking and for lending, basically.
The idea is really to make Coinpanion this fidelity of digital assets by slowly going from the most common market, which is cryptocurrencies, into going a bit more niche over time, which is NFTs and DeFi. With NFTs, basically, it opens again up a completely new space, which is then digital art, gaming items, virtual land, domains, et cetera, et cetera. So, building the fidelity of the 21 century, if you can call it like that.
[Horacio Ruiz]
Yeah. Absolutely. I mean, I want to even want to take it a little further back. You mentioned that you were familiar with Bitcoin from when you were in high school, and I can tell you that kids in high school have an idea of what Bitcoin is, but it’s rare for them to really be trading with it or to be using it as a currency. When you first got exposed, I mean, it seems like you’ve… Red pilling. You called it the red pilling. So, you’ve been exposed in the space. Was it because you saw that there was an avenue to make more money, or what was it about?
[Alex Valtingojer]
Yeah. I actually didn’t think about Bitcoin as an investment initially. Like I said, it was just a means of exchange. So, because on these online forums, which are used to buy and sell these game keys, a lot of people just paid me in Bitcoin. And so, I saw it as a bit of an inconvenient form of PayPal, to be honest, because it was like, “Okay, now I have this Bitcoin, which I have to sell if I want to buy a motorcycle or something like that, which in the end I did.
But for me, it really was just a medium… It was just a digital form of money. But I found it pretty interesting because it was like, okay… From a technical perspective, I found it really interesting because it was like, okay, it’s an algorithm which makes sure that it’s scar. So, there’s no more than 21 million Bitcoins, and there’s an algorithm which makes sure that it’s not more. I was like, “Okay, that’s a pretty cool concept from a technical perspective.”
But back then, I really wasn’t in a mind that I saw this huge opportunity of, okay, this could basically overtake the gold standard. Oh, this could become a new form of payment or a new form of money. It was just, okay, it is just a bit of an inconvenient form of PayPal. It just started transforming, for me, this view on crypto. I’m definitely not a Bitcoin maximalist, and you’re going to notice it soon.
For me, really the red pilling moment was actually when I got in contact with Ethereum as my contracting platform, because then there was the point where I was like, “Okay, whoa, fuck, we can build a lot of cool applications on top of that and basically automate away a lot of middlemen trust parties.” So, I saw this smart contract idea of automating trusts. We have a tool to automate trusts. That was, for me, the real point where I saw, okay, crypto is a big thing.
[Horacio Ruiz]
Yeah.
[Alex Valtingojer]
Like I said before, Bitcoin, I think when you’re like 15, 16, I think you don’t have the mental capacity to really see that innovation from the beginning, especially if you come from a completely different around, is like, “Okay, I like gaming. I like selling game keys.” I didn’t have this understanding of investing. I didn’t even know there’s stocks and I can invest in it, and there’s companies behind it, which pay dividends. And there are different forms of investing with commodities, ETC. I wasn’t yet in that state.
It started really in 2017. But my Bitcoin amount, the Euro amount behind Bitcoin grew to such a significant amount that I was forced to check what is actually happening in it and what is investing and what is money to a certain degree. Then for me, Bitcoin, just transformed to a logical solution of, okay, we’re living in a digital life. New generation basically grows up as the digital natives.
I guess we both are digital natives. So just make sure that we just make sense, that we also have a digital form of call to digital asset of scarcity, scar, which is really limited, transferable, and trackable. So, for me, Bitcoin is just a sophisticated update of gold, and I see gold as like a huge thing. It sometimes feels like when people say, “Okay, Bitcoin is just a digital gold,” it’s actually downplaying the role, but I think that’s actually a huge deal of having like a digital scar asset.
I think that’s what Bitcoin is becoming slowly but steady, especially with the generational shift and the digitalization of the world. But I think the huge, huge opportunity of crypto is way more in the ICON space, where we have smart contracts, NFTs, DeFi applications, which is basically going way more and deeper areas of our lives, which is basically culture, financial services. I think that’s just a way bigger market. Nevertheless, I still think crypto’s a… Not crypto, but Bitcoin is a huge thing.
[Horacio Ruiz]
Absolutely. Absolutely. It’s so interest to hear your journey and how you view things, and then how your views evolve and change, because of the news or because something just… Bitcoin became something different. I want to also go back to the earlier version, if I could say that, of Coinpanion, where you had this copy trader platform and you called it as like gambling. Who were you copying? Were there certain investors that you were following? Was it funds that were being established?
And then, what did you find out about that? Did you find that a lot of times, those guys that you were copying or those funds that you were copying, weren’t very transparent and maybe they were doing things behind the scenes that even if you wanted to copy what they were doing, you couldn’t do that?
[Alex Valtingojer]
Yeah. Yeah. I think Coinpanion follows the same route as I did. I really grew up in that crypto thing. I got into it in a really young age where basically that, because I got in so young, basically my whole life started just turning around crypto. I would say I’m a crypto native in a way. The idea of Coinpanion also developed really as a side project. We didn’t really think about creating a platform or a company out of it. It was just like this issue we had personally as founders, that we wanted to have a passive way to invest in crypto and digital assets without actually putting in the time to research it and basically building a portfolio.
And because there wasn’t a solution of an ETF, we just thought of I guess the most simple answer of the problem, is cannot just somebody else take care of my investments, so cannot just somebody else invest in crypto for me. What we then started doing is we started creating a platform where you could replicate actions, which somebody doesn’t exchange on your own exchange account. For example, you have a trader or an investor, whatever you want to call him, who is doing his investments in cryptocurrencies, on binance, and I myself, I just want to like replicate that what he’s doing on binance on my Kraken account, or also Kraken to Kraken.
So it was just interconnecting exchanges and actions, what is happening on that exchange. The issue wasn’t that much in tracking what is happening, because even though it was a bit early, it was like 2018, the APIs of the exchange were pretty sophisticated. You could track what is happening. You could more or less track in real time, what people are doing on the exchanges and replicate it on our exchange.
I mean, you have the smaller issues of like price difference and slippage, but these smaller issues in a general portfolio view doesn’t make the biggest difference. We started not liking the product in the end. We finished it. We had some traders. It was an open marketplace concept, so people just signed up and offered the account for [inaudible 00:12:30]. So, it was not that we actively sourced like fund managers or traders. It happened that people were interested in it.
I think in the end, we actually had around 100 traders offering their portfolios for mirroring, so I guess the platform got some traction. But the main issue we saw was more on the customer side. You had all these traders, which followed some sort of strategy, who knows what strategy to follow. And people just always followed the trader which had the biggest performance, like the best performance.
There are people who had super lucky trades with some [inaudible 00:13:10] or unknown project, which exploded and made 100% in a month. People started replicating these people once they made the 100%. There was trader one who made 100% profit in one month and then the customers came on the platform and saw, oh, this guy is making 100% a month. I’m going to follow him. Then it started dropping because it’s super volatile. It started jumping around between different traders and eventually churned because they found out, okay, it’s not working for me.
I think that’s the main issue of how copy trading works because you have so many offerings and so many people with different opinions, different strategies. Like we mentioned before, it’s a new really [inaudible 00:13:53]. You also don’t know really who you’re following. So, it most attracts followers, let’s call them followers, which just want to make a quick buck, and not really investors for the long term, which say, “Okay, this is a methodology I can relate with, and this is a company I can trust. I understand the system behind it and just want to replicate or invest in a product, in a portfolio management.”
With copy trading, you have, I guess, the other way around where you just have too much offering where you don’t know what’s going on. You just see percentages jumping around and trades jumping around, where you blindly follow things. That basically just attracted the wrong kind of customers. And basically, also was a product we didn’t like to use, and in the end, initially, we were building a product for ourselves. So, I guess that’s the story behind the copy trading.
I mean, I don’t want to say copy trading is a bad thing per se. I think it definitely can work, and that for sure, really talented asset managers in the end on platforms like Ethereum. I just think for the general purpose of the platform, the general product, it just meant more for people who want to make quick money. I always feel like quick money is strongly connected to gambling, because there is no easy market and there is no easy money on the market.
You always have to be committed, to a certain degree, to an asset class and stay in that asset class for a longer period of time. Otherwise, it’s just luck if you make money on it. I feel like copy trading platform, copy trading itself promotes this way of making quick money, fast, easy money.
[Horacio Ruiz]
I love what you said there, there is no easy money to be made.
[Alex Valtingojer]
Yeah. Even in crypto sometimes it feels like, okay, you can make a lot of money in a short amount of time. Sure. You can do that, but you never know when it’s happening. I think if you really go in, okay, let’s say you go in today, and I don’t know, Bitcoin doubles tomorrow, it was a lucky trade. But this is really hard to replicate and won’t work in a long term. The only thing which really works in long term is in diversification and having a long-term view, because if you really believe in a technology, in an idea, in a theme or in a category, and you say, “Okay, I’m sure the world has transformed… Like robotics are going to transform the world in the next 20 to 30 years,” then you also have to have to stomach to stay in that long, because especially on short time frames, the market is not rational.
The market is super emotional, and I think a lot of people start forgetting that, and you have to be cautious to not get emotional as well and sell your positions just because the market is dropping short term, because in the end, as an investor, you go in because you believe in the long term potential of it, and you believe in the long term profits you can make out of it.
[Horacio Ruiz]
Definitely. Absolutely. I want to get into your portfolios now that you offer on Coinpanion. You have different risk tolerances. We talked about that at the beginning, and you label them Cautious, Balanced, Adventurous. Then you have a separate funding with the NFT and the Metaverse. Let’s talk a little bit about the Cautious one, because that’s seen… I’m looking at the website now, it’s seen about a 30% return on investment since April 2021, and 80% of it is consisting of US dollar stablecoin.
[Alex Valtingojer]
Yep. I know that’s a bit confusing on a platform. We’re actually working on making more understandable. Like I mentioned before, we see as the fidelity of digital assets and digital assets as cryptocurrencies, all this NFT space, and DeFi. So, everything which is based on DLT technology, distributed ledger technology. What the Cautious portfolio is built up is that it has a 20% exposure to cryptocurrencies, which is the Coinpanion selection, so all selection of fundamentally analysed cryptocurrencies and 80% exposure to our DeFi lending product.
So, you have 80% in USDC with a fixed income of 6%, which really in the background generate to these decentralized finance lending. It’s this combination, okay, I have a bigger exposure to DeFi because DeFi is generally less risky. Depends on which platforms you go and how much you’re searching for. But in the end, it’s based on the stablecoins. You don’t have to volunteer to risk off the crypto and you generate a high return compared to bonds, for example, because you get 6% fixed on that USDC. I think on bonds, you’re lucky if you get 2%.
Then you have to 20% risk exposure, which is in the end cryptocurrencies. And within that cryptocurrency’s allocation, it’s our selection, which we fundamentally check. So, you can somehow compare this allocation models with this classic 40, 60% bonds and stocks split, or 20% stocks and bonds split, depending on risk profile. It’s a replication of the classic general portfolio method, which we knew back in the days when alternatives were not really an option for the everyday investor, just replicated into the crypto digital asset space.
[Horacio Ruiz]
Yeah, absolutely. I mean, the Cautious, like you said, is 80% exposure to the DeFi space. And then that Balanced portfolio that you have is that 60, 40, like you said, that traditional. Then the Adventurous one, it’s all just the cryptocurrencies and different currencies and different metaverses as well.
[Alex Valtingojer]
Exactly.
[Horacio Ruiz]
How do you determine which points to put in, which currencies to put in your funds? Because there’s so many. Obviously, Bitcoin and Ethereum would be at the top because they’re the two biggest cryptocurrencies in the world. How do you allocate the other ones?
[Alex Valtingojer]
We have a bunch of smart people at Coinpanion. We are purely data-driven [inaudible 00:19:28]. So, we have a data driven system to fundamentally analyse cryptocurrencies. That’s actually pretty interesting. The really nice thing about crypto is it’s based on blockchain, and blockchain is transparent. So, you can actually track what is happening on the chain. So, we developed a scoring system for cryptocurrencies to say, “Okay, this is a good project and this a bad project.” We call it the Coinpanion Crypto Score.
In the end, the score is based out of four parameters, which we use to analyse the cryptocurrency. The first one is blockchain activity. I mentioned it before, so like how much transaction activities there, how many wallets are created, how many smart contracts are executed? How much is the blockchain itself used?
Then the second part of the analysing parameter is developer activity. We can scan GitHub, GitLab, et cetera, et cetera, how much activity is there, how many developers, how much activity is in the project development itself. It’s part of the score. Then the third one is sentimental data. We analyse different data sources like Reddit, Discord, Telegram, news pages, and basically check, okay, is there a network effect happening for the project?
Are there a lot of people talking about Polygon? Are there always more people talking about Polygon, and are these people talking positively about Polygon? If you see, okay, this is a growing topic within the general space or the general community space, then we say, “Okay, this is a good project again. So, this parameter is positive.”
The fourth parameter is actually more a market driven parameter. So, we can also analyse to blockchain, again, how demand is, how the money flow is. And we look at market data, for example, how much money is flowing into exchanges? How much money is going out of the exchanges, how are the assets allocated on different addresses? For example, is there one address holding 95% of all Ether? Is it like that or is it like a distributed asset? Because in the end, it’s like we’d risk it if you have most of the assets on one address.
To summarise, it’s again, blockchain activity, developer activity, sentimental data, and market data. These four parameters basically then form one score together. The score is going from zero to 1,000. And if the project has a score over 600, it’s included within our selection. So, it’s really just analysing a bunch of data, automate it, and then basically come up with a score.
[Horacio Ruiz]
I expected you to give me a good explanation, but you exceeded my expectations, Alex.
[Alex Valtingojer]
Yeah. This is also an internal project here at Coinpanion. We plan to launch end of February and on webpage, which is then called Coinpanion Crypto Score, where you can… Similar to CoinMarkeCap, just see our scoring model for different projects. So, people can just use it to have some more in deep… Yeah. To have a better understanding. Is this a good project or how are the different parameters built up, and does it succeed on…? Is it like, for example, a sentimental positive score for the project? So, we are planning to make the crypto score transparent and open.
[Horacio Ruiz]
So, you get the data, and you have your scores. Does that cause you to change the percentage of a given currency within a portfolio, or would that also cause you to swap out currencies, cryptocurrencies? Or do you feel like you have to at least stay with what you’ve invested in for a period of time?
[Alex Valtingojer]
The score, the Coinpanion crypto score, is just used for the selection universe in the end, so which assets are included in the index, in the portfolio. Then we use risk parity balancing to determine the allocation within the portfolio. Risk parity, I would say, is yeah, state-of-the-art asset management method. To basically look at a risk metric, we use volatility. If the asset is getting riskier, you basically start reducing the allocation.
For example, if Ether starts becoming super volatile and going up and down a lot in a small period of time, if a high draw, then high ups, then we basically start automatically reducing the exposure to that asset. So, you reduce the risk of the portfolio. And we’re doing that on a weekly basis. On a weekly basis, basically based on risk parity, we rebalance the portfolio.
For the coin selection, like I said before, we have the scoring model, which basically gives you the selection universe. What we do is we run it quarterly. Every quarter, we basically analyse everything you can find on CoinMarketCap and check it through our parameters, if there’s a change like in the scoring model. So, if one client, for example, doesn’t fit our criteria’s anymore, or there’s a new project which seems to fit our criteria. So, it’s like a rising star within the criteria’s, we start including or removing it from the portfolio allocation. Okay, the crypto score is to have the selection of the assets and then risk parity to allocate it. And then quarterly, we update it based on the pending crypto score.
[Horacio Ruiz]
Thank you for that explanation. I want to talk about the fourth fund, the NFT and metaverse fund.
[Alex Valtingojer]
Yes.
[Horacio Ruiz]
I don’t know. I love that fund because you really have to be a believer in the future of NFTs and the future of the metaverse to invest in that. You have the big players there. You have Ethereum. You have Axies, MANA, SAND, Enjin, Flow blockchain. So, you have all the big players there. The exposure’s there, it’s diversified. Could you talk about that, I mean, the development of that and how you decided to create that?
[Alex Valtingojer]
Yeah, definitely. Basically, the development for each portfolio is the same. We always use the Coinpanion Crypto Score for the selection mechanism and basically then use risk parity to balance the assets. What we started doing now is, because we got a lot of interest of specific domains within the cryptocurrency space, that we offer category-based portfolios.
For example, the NFT and metaverse portfolio, which is just covering projects which are into this domain of building the metaverse or our NFT projects. For example, you mentioned before, if you own Polygon, et cetera, et cetera. So, there are a lot of projects which basically support that ecosystem for NFTs or support the ecosystem of the metaverse. Actually, I think around 40% of our customers have an exposure to the NFT and metaverse portfolio. So, it’s definitely one of the most popular products on the platform.
The idea was basically customer driven. We got a lot of customers asking us, “Oh, what do you think about the metaverse and NFTs? How do you think is the space of transforming? How much impact is there already? What’s the potential behind it, ETC. We saw that customers wanted to have some exposure to that space. And because we at Coinpanion are also huge believer in it, so that’s also the reason we want to offer products mainly focused on NFTs, for example, like digital art, gaming items. I mentioned it before.
We said, “Okay, that definitely makes sense to have a thematic product just covering that space.” If people really want to go into the NFT tech and metaverse tech, they can have a simple exposure to it. I think it makes even more sense also for a bit more experienced investors in a crypto space, because like the Cautious, the Balanced, and the Adventurous portfolio is really for beginners who say, “Okay, I want to have a crypto exposure, but I don’t want to take care of checking your market or getting deeper into the space, and Bitcoin or Ethereum, for example.
But the metaverse, NFT and metaverse portfolio, is like touching again a completely separate space of the whole cryptocurrency market. I guess it takes even more time. You have to spend even more time to research, to stay up to date because it’s such a fast-paced environment. We basically take away that work from the customer and say, “Okay, if you want to have exposure to that part of the cryptocurrency market, you can easily invest in it through our portfolio.”
The ideas was really customer driven. We believe in the space, and we just wanted to offer simple solution for the investors. But the methodology always the same. It always says the data driven fundamental approach to select the cryptocurrencies and our data-driven allocation algorithm.
[Horacio Ruiz]
So those are the four funds right now?
[Alex Valtingojer]
Oh, no, we actually have a fifth one. Yeah, it’s probably not a landing page yet because we are rebuilding it. We also launched I think it was two or three weeks ago, a DeFi focused fund. It’s the same for NFTs and metaverse. I think DeFi, decentralized finance is one of the main spaces involving within the cryptocurrency domain. And we wanted to offer products around exactly that domain and release it [inaudible 00:27:47] about three weeks ago.
[Horacio Ruiz]
Okay. Looking forward to that. Would you say that that’s more on the cautious side or is that more on the riskier side?
[Alex Valtingojer]
They’re definitely both more on the risky side. So, it’s like a 100% exposure to crypto. I would definitely say it always depends what you define as risk. But I would say, generally, the asset class, cryptocurrencies is a risky asset class. If you say, “Okay, I have 100% exposure to NFT tokens or DeFi tokens,” which are generally even a bit smaller than Bitcoin or Ethereum, then it’s definitely a risky portfolio. I would say they both are the two riskiest portfolios we offer on the platform currently.
But it always comes with a but in the end. It’s always this trade off of risk and reward. I would say they are super risky, but they have a huge upside potential too. So definitely not put like 100% of your disposable income into the NFT or metaverse portfolio, or the DeFi portfolio. But it probably makes sense if you say, “I believe in that space,” and have some sort of allocation to it.
I think what investors have to see is really, you always have your overall portfolio, which is a combination of hopefully different asset classes. And then, within that, you can take more risky positions and less risky positions. Just, in the end, as a general total portfolio, you have to be fine with the risk you take.
[Horacio Ruiz]
Absolutely. It’s funny, like you said, it depends on how you define risk. I like what you said, because definitely the cryptocurrencies are volatile. But if you believe in the space and you’re willing to be a long-term holder, the way you view that risk is… Or you don’t even view it as a risk anyway. You probably view it as it being inevitable, the way of the future. And so, you’re okay with losing 50% of the value of a fund if you’re looking at a 10, 15-year horizon.
[Alex Valtingojer]
Definitely. Risk is actually a super interesting topic within the investing space, because there is not a metric which is risk. Like you cannot define mathematically what is risk. You can say, okay, volatility is risk, or a drawdown is risk. Or I don’t know, if the Sharpe ratio is below X, it’s risk. So, there are different metrics you can use to define risk, but there’s no general explanation, okay, if X is the case, then it’s risky.
Then there are more fundamental factors, like you mentioned before, if you really believe their future and you see that it’s impossible that this is not going to happen, then how does that reflect in the risks again? I define risk a lot with volatility and drawdown, so how much losses can you take within a timeframe? Because crypto, except for perhaps it’s not risky at all, but I guess it’s super risky if you just view your investing time spent is just a month, because then you can lose 90%. Who knows? So really, I would say, it’s a philosophical question, what is risk. In the end, you just have to be fine with it.
[Horacio Ruiz]
Absolutely. You touched upon the weekly rebalancing, which is great. I’m limited to some of my funds that I invest in, in the United States. I can only rebalance like my savings accounts for my children or even some of my retirement funds, I can only rebalance them like twice a year. So, it’s amazing that you’re doing that every week. The second thing I want to touch on though is… And I see this and I’m always curious, having a carbon neutral portfolio. What does that mean, and is that part of the regulations in the EU?
[Alex Valtingojer]
It’s definitely not part of the regulations, so you don’t have to have a CO2 neutral portfolio. All our products you buy on Coinpanion are basically CO2 neutral, which means we compensate the CO2 involved in blockchain activity. It’s always a bit of a hard topic. I would say there is definitely an energy problem within the cryptocurrency space. Bitcoin is using up a lot of energy. Ethereum is using a lot of energy. And there are different other projects which use relatively a lot of energy.
But I would also say the space is definitely moving away from it, because we had the switching from the consensus algorithm of proof of work, where we use energy to validate transactions, to use capital, proof of stake, to validate transactions and use capital asset consensus in the end, which is, on the one hand, way more energy efficient, because you don’t have to use computer power to validate transactions.
The second thing is, which is also important, is it’s way more scalable. We are running in scalability problems with the proof of work consensus algorithm. On one hand this, okay, it is not ideal currently, but on the other hand, it’s getting way better, and we already see a lot of projects which started with proof of stake, which have now high market caps, high usage coverage, and also existing projects like if you’re moving to proof of stake, which is basic energy efficient.
But what we wanted to do as Coinpanion until that happens is to at least compensate what is indivertible currently. What is the energy involved which we cannot touch in the end? We started to make calculations around, okay, how many transactions are happening because of Coinpanion on the Bitcoin blockchain, for example? How much energy is involved in every transaction? And in the end, come up with a calculation of, okay, this is how much energy is used for our transactions, and this is how much CO2 we estimate that is generated because of Coinpanion or the investors on Coinpanion.
In the end, we doubled that number. We calculated and estimated it. We doubled it in the end, and we then collaborated with a company called Offsetra to compensate it. We basically use our revenue, which we generate for our portfolio management activity and invested in, for example, solar projects, forest protection projects, and try to just do our fair part in making it less of a problem.
[Horacio Ruiz]
That’s a great idea, man. Really, this should be almost at the front of the website, if I could say so myself, because it shows that you’re compensating, and it shows that you’re aware of the issue. I think people will tend to give you some credit for that. The other thing, I guess, when you speak about that, I almost feel like the cryptocurrency space is… Yes, there’s an energy consumption problem or issue, but it’s almost like they’re building and using the energy to build something better in the future. It’s almost like an investment, right?
[Alex Valtingojer]
Yeah. I definitely don’t see it as, like you said, it’s an issue because it’s never good to consume a lot of energy, especially in times like this, where we actually really have to look out for… We really have to look to reduce CO2 emissions. So, a lot of energy in consumption is not good. But you said we needed that invention because it’s improving a lot of different aspects of our life, and we know it’s just a temporary thing. I think that’s the most important thing. It’s just temporary. It’s not the end solution, and we know it’s going away from that side.
[Horacio Ruiz]
Absolutely. Let’s talk about from the investor side. Somebody’s interested in investing in your portfolios. Could you talk to me a little bit about like, is there a minimum that someone needs to open an account? What are the fees? And also, if you could talk about the geographical areas, who can invest? We have listeners all over the world.
[Alex Valtingojer]
Currently we are only open for European investors. So, you have to have your residency seat in the European Union or the European economic area. Unfortunately, we cannot accept US investors. But for all the European investors is actually is super easy. Actually, you can enjoy the product with low minimums, so you can start with 50 euros. Easily pay in with a bank transfer or a credit card deposit or debit card deposit.
The fee model is also pretty transparent. You see it on the website and within the dashboard and then in transaction history. You pay at 2% manage fee on our managed products per year. We calculate it monthly and charge it monthly. So, over the years’ timeframe, you pay 2% on your portfolio amount. And then we have a exchange fee, so every time you buy and sell our product, there’s a 1% fee involved.
For example, you invest now 100 euro in our Adventurous portfolio, you in the end have 99 euros to start with in the Adventurous portfolio, which I think is a fair system compared to other brokers. For example, where you… Like Coinbase, we pay 1.5%. We are bit on the cheap side with the brokerage fee, but for the managed products, you have the 2% management fee. If you want, you can also buy Bitcoin and Ethereum through Coinpanion. And we also extend in the single asset selection.
So, if people get interested in investing, like I don’t know, they try out their NFT and metaverse portfolio, find one project super interesting, they can even increase the position individually. So easy platform. We have a web application. We have an iOS application. We have an Android application. So, I would say it’s pretty, pretty easy to start with Coinpanion. And that’s the general idea. We want to make it as simple as possible so everybody has the chance to really participate in a, I would say, once in a lifetime [inaudible 00:36:38] asset class.
[Horacio Ruiz]
Absolutely. It truly is. Any plans on expanding to where you could get investors from different parts of the world, other than European?
[Alex Valtingojer]
We’re now, and also for the time being, strongly, strongly focused on the European market. We see a lot of potential here, actually, because if you compare it to, for example, to Asia or the US, the market in Europe is definitely not as developed as the United States. We see that there’s space for a regulated solution in the European Union. We’re basically focusing our energy on building a product for European Union and being the leader there.
So, as of right now, and I would say also in the next couple of years, our focus will remain on European Union or the European economic area. In itself, it’s already a huge market and we definitely still have a lot of space to grow there.
[Horacio Ruiz]
I want to touch on maybe one or two more questions. I think we talked about this prior to recording the conversation. You talked about then moving into fractionalizing NFTs in the way that… I don’t know if you’re familiar with the platforms in the United States, Rally or Otis.
[Alex Valtingojer]
Yeah, yeah. For sure. I use them.
[Horacio Ruiz]
Yeah, you use them. Okay. So, you were talking about developing that yourself. So, you’re basically going to buy an asset and then sell the shares off. Interesting to talk about that. The second thing is though you, and I read something where recently, you saw how the NFTs had a little run there for like a week. Maybe they’re starting up again, because you know how NFTs are.
[Alex Valtingojer]
Yeah.
[Horacio Ruiz]
They decoupled from the crypto world. The NFTs almost became like a completely separate asset class. Yes, it’s Ethereum, Solana, you have all these different crypto currencies, but they almost for a while, they looked like they were going to do their own thing, and they really did for like a week.
[Alex Valtingojer]
Yeah. Fundamentally, it also makes sense because it’s the same technology, but it’s a different asset. But yeah.
[Horacio Ruiz]
Yeah. I mean, the bored apes reached an all-time high. The floor price got up to like 320, 330,000 almost. Do you see that happening where it really should be treated as a separate asset class that’s going to create its own economy, even though it already has?
[Alex Valtingojer]
Yeah. Now we’re tapping into a topic we can make an own podcast once on NFTs if you want.
[Horacio Ruiz]
Sure.
[Alex Valtingojer]
Yeah, I’m a strong believer in NFTs because I definitely think this is where our world is moving. So, I strongly believe in this metaverse idea that our lives become more and more digital, and that the moment you’re born in this time is basically… The moment you’re born, there’s a digital copy of yourself. I think this is becoming stronger and stronger, this digital nativeness of our way of living digital. So, I think NFTs are just a logical supplement to it, because, also in a digital ecosystem, a digital world, you want to have uniqueness in ownership, and that’s basically what NFT brings to the digital world. So, I strongly believe in it.
I also believe that NFTs in itself are an own asset class or are becoming an own asset class. I think in far down the road, that within NFTs, there will be multiple asset classes because NFTs in the end, I know it’s like a buzzword right now, but NFT is basically just a technology. It’s just, okay, you have a non-fungible token, which represents a digital good in the end. But you can use it for so many different things. You can use it for virtual land, like Sandbox, Decentraland.
You can use it for music rights, so you can participate on musicians’ royalties. You can use it on digital art. You can use it for community items. You can use it for gaming items. So, everything which happens in this digital ecosystem, you can use NFTs for, to basically make them unique and ownable. I strongly believe, over the long term, we will see digital art as own asset class. We will see gaming items as an own asset class. We will see domains as an own asset class. We will see virtual land as own asset class.
I think, over the long term, the space is becoming so, so huge. That’s actually the thing which makes me so crazy about it, is I strongly believe this is actually the biggest market in itself. This is basically the digitization of culture, which is currently happening, the making ownable and transferable and monetizable. And so, I think we’re in a super, super early stage of NFTs, even though there’s a lot of hype, but if you look at what projects are out there or how the market cap is currently, I think it’s around 40 billion, something like that. It’s super, super early.
I mean, art itself is like 1.7 trillion, something like that. Like the classic art market is so much bigger than the whole NFT market, but I think NFTs touches way more asset classes in itself. So, I think this is going to become way bigger over the future but will take some time because most of the projects we currently see are, yeah, I would say collectibles by best. And there’s not so much use case yet. It’s developing, there’s a lot of money going into the space. There’s a lot of energy. There’s a lot of human capital and intelligence going into that space, but it’s currently in a super, super early phase.
Also, I would say, in a bit of a risky and dangerous phase, in a sense of 99% of the NFTs you currently see on the market will be more or less worthless over the next 10 years.
[Horacio Ruiz]
You do believe that there’s going to be some pain there, that for people right now that are holding maybe an NFT project, that’s 2, 3, 4 ETH, that you do believe that… Talk about market zero. Yeah.
[Alex Valtingojer]
Yeah. I mean, you always see this when new markets develop. We saw it with the dotcom bubble. We saw it with crypto 2017. And we also see now in crypto. So always when there’s people getting interested in something and there’s a hype forming, it always depends how big the hype is. But within a hype, there are always useless assets, which in the end have no value beside the hype.
I see it a lot now happening with NFTs. There are a lot of collections or art collections or what do you want to call them, which have no artistic value in itself. This is not an artist which has a history and a culture connection. It’s not an art piece which you can use, I don’t know, as a key to a secret club or something. It just a random avatar. And this is a lot of projects currently and I don’t see that having value over 10 to 20 years.
For sure, some projects like CryptoPunk also have no value in itself, but I think they have this culture value already, that they’re the first collection in the NFT space. And being the first has already value in itself. But I think a lot of which came after it doesn’t have the standing point of being the first mover in it. That’s the reason I think, okay, a lot of people now see that NFTs are a thing and get a bit too over excited about it. And that’s the reason they invest in stuff they don’t understand, which in the end don’t have value.
Similar with all these ICOs we saw. I mean, there were ICOs for, I don’t know, token-based dating where you basically have tokens in a pool and if one party doesn’t show up, the other party gets the token. I was like, “What use case is that?” We had a lot of these super strange use cases which raised ICOs of like $10 million, like, no, they have no value. I mean, it was back then. Sure. It was fancy to do an ICO and have a token for it. In the end, there has to be some use case.
We saw now there were some projects which had use cases and now developed into massive players within the cryptocurrency space and we will have the same in NFTs. But at the state of which the market is right now, I don’t know. 95 to 99% will be worthless because they’re just a product of hype.
[Horacio Ruiz]
Absolutely. Yeah. It’s such an interesting space. And like we talked about before, when we talk about NFTs five, 10 years from now, we’re going to be talking about something completely different. But the thing is that right now, it’s those art projects that are driving it. That’s the interesting part. It’s the easy thing to catch our attention and to drive this industry, that’s going to start.
[Alex Valtingojer]
I also think it’s super important it always has to start with a hype, because people have to get interest, so there has to go some money into the space so that development happens. I think it’s fine, that it’s good in a way. I think you have to be a bit cautious of it.
[Horacio Ruiz]
Absolutely. Alex, it was a pleasure talking to you today, learning more about Coinpanion. How can people follow you on social media, visit your website as well, coinpanion.com? How can they visit you? How can they get in touch with you or your company?
[Alex Valtingojer]
Yeah. We also offer a bonus code for everybody who listens, which is ALTS20. So, if they sign up for coinpanion.com, they get a 20 euros bonus on their first deposit. It’s actually free money, so try it out.
[Horacio Ruiz]
So, the coupon is ALTS20, A-L-T-S 20?
[Alex Valtingojer]
Yeah. And if people want to follow… Yeah. If they want to know more about my opinions, because I write a lot about the space and read a lot about the space and have a lot of opinion about the space. So, if people are interested in it, they can easily follow me on LinkedIn, which is Alexander Valtingojer. Yeah. Follow me on my journey to become a crypto entrepreneur and also my opinions on the markets. There are a lot of developments in it.
[Horacio Ruiz]
Really learned a lot today, Alex, and that’s always why I look forward to doing this podcast, just learning from you guys and continuing to have these discussions. Alex, again, thank you very much. Thanks for being here. And I’m sure our listeners appreciate it.
[Alex Valtingojer]
Yeah. It was a pleasure.
[Horacio Ruiz]
Alex described the times we’re living in as a once a lifetime opportunity in terms of money and emerging technologies. I tend to agree with him. But at the same time, it’s the tried-and-true methods of being patient and staying the course that he advocates for investors. I applaud Coinpanion’s efforts to acknowledge and address the energy issues of digital currencies and being proactive in creating CO2-neutral portfolios.
For our listeners in Europe, Alex is offering 20 euros when you invest just 50 euros into one of Coinpanion’s portfolios. That’s 20 free euros when you fund a portfolio for just 50 euros. Just make sure to use the code ALTS20. That’s A-L-T-S 20 with no spaces. If you enjoy today’s podcast, let others know about it. We find our guests so interesting and knowledgeable, and I know others will too, or leave a review or hit the follow button. Until the next episode, take care.
