crypto-currencies | Bitcoin: French asset manager Jad Comair rejects Ray Dalio’s fear of Bitcoin

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Ray Dalio, the world’s largest hedge fund manager, believes that if Bitcoin outperforms regulators will kill it. His counterpart across the Atlantic, Jad Comair, founder and CIO of Melanion Capital, believes that this situation is unlikely. In a conversation with ETMarkets.com, the Paris-based hedge fund manager explains why regulation could unlock the full potential of cryptocurrencies, how Indian regulators should handle digital assets, and why Bitcoin is better than gold. Edited excerpts: Melanion became the first EU fund to set up a Bitcoin tracker. What were the challenges you encountered in convincing regulators of such an ETF? The way we were able to do this was not to convince the regulator to change the regulations. What we have done is have built a proprietary index made up of companies in the Bitcoin space. It is therefore not a Bitcoin tracker, but it is a stock market index composed of companies operating in the Bitcoin space such as Bitcoin miners, equipment suppliers, stock exchanges, companies that have Bitcoin on their balance sheet. like MicroStrategy and crypto asset managers. We took all of those companies that operate in the crypto sphere and built a stock market index based on each company’s correlation with the price of Bitcoin. There is a basket of 30 stocks that were historically the most correlated to the price of Bitcoin and thus we can avoid direct exposure to Bitcoin. On the contrary, one gets indirect exposure because they operate in this space and at the same time there is a compliant fund to meet all the existing requirements. Although this is only a basket of stocks because it is Bitcoin, the regulator has exercised additional oversight to make sure everything we have done is correct.

Do you think that this could possibly be the model that other mutual funds could follow in the future? If possible, it is best to do this in a format that already exists because the current formats are much easier to use. There is still a lot of political tension around cryptos. Going through the traditional route, it is enough to manage the perception. In my opinion, there is a lot of media coverage on a Bitcoin ETF. But I’m having a hard time figuring out how a pure Bitcoin ETF, where funds will directly hold Bitcoin, can survive in the long run.

If Bitcoin goes to zero then they will be gone and if Bitcoin becomes what we all hope it will become then we can have Bitcoin and everything Bitcoin accounts like US dollars. There is no US dollar ETF because it doesn’t make sense.

I think now the shift from an investor perspective has to happen towards the Bitcoin ecosystem. Every month a new Bitcoin miner is listed on the exchanges. So there is a great ecosystem there and investors should start looking into these things. This is also why we prefer the equity path because we believe that there are more interesting things being done in the Bitcoin ecosystem rather than the digital currency per se.

When regulators look at cryptocurrencies, they see them as an atomic bomb that will blow up their carefully maintained financial system. How should regulators approach cryptocurrency? If you remove all the noise, most regulators aren’t against cryptocurrencies or Bitcoin. Their main objective is to protect the investors who invest in them. There have been, unfortunately, a lot of negative headlines where investors have lost a lot of money, got ripped off, stolen, hacked, etc. In my opinion, the regulations are going to be a net positive. I am shocked at the lack of KYC in all of these products which are generally standard in the financial industry.

So this is where the regulations will come into effect and that would be a net positive because so far the main adoption has been by individual investors and large institutional investors have not stepped in. Regulation will allow cryptocurrencies to have a much more solid foundation because you have to operate in a way that protects investors. Once you have the right regulations, it could unleash the full power of crypto.

Ray Dalio of Bridgewater believes that if Bitcoin becomes too efficient, governments and regulators could kill it. Do you think Bitcoin can still be killed? For now, regulators view Bitcoin as a digital asset. They see it more or less as gold but when they start to see it as silver, they might be tempted to hinder it or limit its potential uses in their territory. This is the scenario I think Ray Dalio was thinking of. I think overall this is a very extreme scenario and I don’t see a developed country like the United States or even all of the G7 countries taking such a hard and strong action.

Most of the countries where this can happen are authoritarian countries and what we have seen so far is that Bitcoin has been adopted in the United States. The United States is where the community is the strongest in terms of penetration but also in terms of resources because you have very deep pockets to invest every day. So even if they were to make such a decision, it would have such bad economic implications that would outweigh any potential benefits of its ban. It’s a very hypothetical scenario, and I don’t see it happening.

Since we hit an all-time high in April, we have seen a very steep drop in Bitcoin. Going forward, what are your prospects specifically on Bitcoin and how do you see this asset likely over the next 12-18 months? in the financial market. What interests us most is the asymmetric return where it can roughly go down to zero but it can also go ten times higher. This asymmetry is really unique and makes it really interesting. What we have seen so far is that due to the increase in adoption, the scenario of Bitcoin going to zero no longer exists. The potential for asymmetric gains is even higher now. Plus, governments are printing money like never before. When I watch the price of Bitcoin go up, I see the price of fiat money go down. It is very difficult to make a prediction on the price of Bitcoin as it is more of a prediction on fiat currency.

ARKs Cathie Wood says Bitcoin could reach $ 500,000. I wanted to understand from you that if he made such a gesture, what would be the catalyst for it? These are the same factors that brought Bitcoin to $ 50,000, which will need to keep pushing it to $ 500,000. The higher adoption, community expansion, and the number of portfolios that we have seen growing very rapidly over the past few years must continue. I think these trends will continue as we now have a new layer coming to mind which is country adoption. People do not yet realize the full potential of this type of adoption and El Salvador is going to be a use case for so many countries that rely on remittances. This will make it even harder for Bitcoin skeptics to remain skeptical, and it will also make it harder for regulators to kill it. The benefits are so strong in terms of financial costs. The implications are much more than in terms of financial costs; it is to reduce poverty and bring about social equality. I don’t see how that can’t convert more countries and more skeptics to this technology.

The Indian government has introduced a bill that will ban all private cryptocurrency. The crypto industry here is pushing the government not to likely view Bitcoin or other cryptocurrencies as competition with fiat money, but rather as a digital asset. Do you think that’s probably the approach the industry should take when it comes to dealing with regulators? Recognizing it as a digital asset is a first step, and a very important step, because people talk a lot about all the bad things that cryptocurrency does, but they tend to forget that the worst asset we store our value today is gold. I say the worst because it has a huge impact on our planet. The job of the gold industry is to dig huge holes in the earth to search for super rare material, then mine it with the help of mercury and devastating chemicals, then all these big companies are trying to leave the mine. in semi-rehabilitated condition. You also have a huge dirty gold industry that is unregulated and adds to all the damage done by traditional miners. Bitcoin is definitely better than gold which has the same property, it does the same thing, and it avoids all of these bad things that gold does. So for me, recognizing it as a digital asset is an obvious decision and it’s almost an urgent decision.

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