The Crypto Winter Is the Time to Invest: Animoca Brands Crypto Analyst

  • Mehdi Farooq is an analyst at Animoca Brands.
  • Farooq explained why savvy investors can capitalize on undervalued crypto assets right now.
  • He explains why bitcoin’s current price is fair, and why polygon is set to soar.

Between massive layoffs at seemingly stable companies, projects collapsing and leaving investors bearing the burden, and the overall market collapsing, many investors have grown tired of the crypto winter.

However, according Mehdi Farooq, an analyst at Animoca Brands — the powerhouse behind crypto projects like The Sandbox — this is exactly the time to capitalize on undervalued cryptocurrencies.

In a recent interview with Insider he explained why he thinks bitcoin can still be considered a store of value, and pointed out some crypto projects that he is still a fan of. 

Why bitcoin is a store of value

A popular investment thesis for bitcoin is that it serves as a store of value to hedge against inflation, because there will never be more than 21 million bitcoins.

However, this thesis doesn’t seem to be holding up. As the market enters record high inflation, bitcoin has contracted in value — plummeting from $46,800 in January of 2022 to under $24,000 today. 

But Farooq believes that this present value is fair, and actually bolsters bitcoin’s thesis as a store of value.

“I do feel there is an appetite for millennials and Gen Z to have a new form of gold that they can resonate with, that they feel is web3 native and which is the anchor point of all upcoming asset classes,” Farooq said. “So, because of that narrative, it’ll still have value and it will capture some market share of gold.”

When Farooq calls bitcoin an “anchor,” he means that other tokens utilize bitcoin in some capacity. For example, if Coinbase users want to purchase a crypto that isn’t available on the platform, they can send their bitcoin to another exchange where they could purchase the crypto that they are interested in.

In other words, bitcoin acts as a bridge for users who want to buy other cryptocurrencies, and will remain relevant even as newer cryptos come online or as blockchain projects begin to utilize different tokens. 

“Now, I think around $20,000 to $30,000, the valuation will be around a trillion,” Farooq said of bitcoin’s price. “So that does capture around 10% to 15% of the market share of gold, which in my opinion, given the risk reward, is fairly valued for me.”

Where to invest during the crypto winter

While Farooq believes that bitcoin is fairly priced, he thinks that the crypto winter is an opportune time for investors to pick up undervalued crypto companies. 

Farooq noted that cryptocurrencies are inherently risky by their nature, and risk assets are naturally being hurt by Federal Reserve policies at the moment. The Fed’s method of putting a stop to inflation is to raise interest rates, which reduces investors’ appetites for risk, and the prices of stocks and of cryptocurrencies take a beating as a result.

But this is more of a matter of timing, in Farooq’s opinion, than any issues with the risk assets themselves — and that creates an opportunity for discerning investors.

“For me, this creates a perfect environment for long-term investors to actually take advantage of this discrepancy,” Farooq said.

He continued: “For investors that have risk appetite, and their time horizon is three to five years, it will be a once-in-a-generation opportunity to scoop some of these growth assets for a cheaper valuation.”

Farooq suggests polygon as a project that he believes will only grow in value over the next few years. Farooq says that through investing in polygon’s matic token, an investor gets “index level exposure” to not only NFTs, but also promising crypto sectors like gaming and the metaverse. 

He provided three specific reasons why he’s bullish on polygon.

1) Partnerships with Web2 companies

Farooq’s first reason for being bullish on polygon is its powerful partnerships with industry-leading companies. 

“All the Web2 companies that are entering into web3 space, they’re leveraging matic. Disney, for example, selected polygon for their web3 accelerator program,” Farooq said.

In fact polygon was the only crypto company — to be selected by Disney for its 2022 accelerator program.

He continued: “You had Facebook use matic for Instagram, and Draftkings, which is a sports betting company, they’re all partnering up with matic.”

Other prominent companies polygon has partnerships with include Macy’s, Stripe, and Adobe.

2) High beta move on the ETH merger

Farooq believes that polygon is well-positioned to capitalize on the upcoming ethereum merge. The forthcoming merge set for September 2022 will transition ethereum’s blockchain from proof-of-stake to proof-of-work. While ethereum’s cryptocurrency ether has already started to surge in anticipation of the event, Farooq believes that polygon will also capitalize on merge.

“They’re building seven products on top of ETH. So you have a seven-x type of advantage in terms of playing them,” Farooq said. 

He specifically cited polygon’s projects avail, hermez, and zero as promising ethereum-polygon projects. 

3) Leverages Indian talent

Finally, Farooq believes polygon, an India-based company, has a strategic advantage over other crypto companies in capturing Indian blockchain talent. 

India is a tech powerhouse. According to the National Science Foundation’s 2018 Science and Engineering Indicators report, India produces roughly 1.8 million engineering graduates annually — or in other words, roughly 25% of the world’s engineers come from India. 

While Farooq believes that polygon is strategically placed to capture this intellectual capital, polygon’s own founder, Sandeep Nailwal, feels the country is at risk of a “mass exodus” of its crypto talent due to the country’s hostile attitudes towards digital assets. 

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