Blockchain and cryptocurrencies as part of the investment strategy

Cryptocurrencies have been firmly established in the Asset management in recent years. However, the financial world remains divided at the same time. Supporters see strong opportunities in the underlying blockchain technology, while critics warn of unforeseen risks. In the following, we provide information on blockchain and digital assets specifically with respect to Colin&Cie's investment strategy and talk to the industry expert Haseeb Qureshi.

Since 2016, Colin&Cie offers its clients exclusive Alternative investments, which target usually institutional investors such as insurance companies and pension schemes only. Alternative investments such as Private equity and Private debt are characterised by different risks compared to traditional investments i.e. equities and bonds. In consequence, risk diversification in a portfolio can and will be broadened, fluctuations reduced and therefore the likelihood of meeting the target return is increased without sacrificing any returns.

To achieve the necessary diversification in Alternative investments, we invest in selected managers with highest level of expertise and years of track record while providing full independence from traditional investments and financial markets.

One of Colin&Cie's major Private equity partner is Florian Schindler, founder and Managing Partner of global technology funds. He invests in highly successful and soaring technology companies. In individual cases, selected venture capital funds anticipating trends are targeted.

One of which is Dragonfly Capital, which invests in mostly young, not yet fully established companies in the blockchain and crypto segment. These companies have innovative business ideas, high growth potential and limited financial resources. Start-up funding is particularly rich in opportunities as well as it can face downsides risk.

Florian Schindler and Haseeb Qureshi, Managing Partner at Dragonfly Capital, view blockchain as infrastructure that leads to profound, positive changes for companies and society as a whole and goes far beyond cryptocurrencies as a simple mean of payment.

The possibility of using blockchain to generate unchangeable, tamper-proof data and increase data protection, data security and the reliability of networks has the potential to revolutionise entire sectors of the economy i.e. the financial sector, insurance industry, healthcare, food trade and logistics industry.

In collaboration with proven specialists such as Florian Schindler and Haseeb Quereshi, Colin&Cie also invests in blockchain technology and thus exclusively indirectly in cryptocurrencies. To limit the risks and volatility of the investments, they are broadly diversified and account for a low double-digit percentage in the private equity sector.

In an interview with Colin&Cie, Haseeb Qureshi speaks about the development of cryptocurrencies, the growing number of blockchain users and the opportunities and risks of digital investments in general.

COLIN&CIE: Mr Qureshi, how long have you respectively Dragonfly Capital been active in the field of blockchain technology and cryptocurrencies and what exactly are your responsibilities?

HASEEB QURESHI: I have been working in this technology full-time since 2017, while Dragonfly has been investing in this area since 2018. As Managing Partner, I help run the company and lead our investment strategy.

COLIN&CIE: How have you experienced the development of digital assets in recent years? 

HASEEB QURESHI: Since Dragonfly has been up and running, cryptocurrencies have evolved from a niche and speculative investment to a real asset class embraced by Wall Street. Nearly 20% of American adults now own cryptocurrency. It is one of the best performing sectors over the last five years. Many of the largest university endowments and pension funds are among our investors. When we started, that would have been unthinkable.

As things stand today, cryptocurrencies can no longer be dismissed as a temporary phenomenon. After the rise in 2017, one might have thought that it was a one-off event. After the surge following the COVID pandemic and the collapse of the FTX crypto exchange in 2022, many observers wrote off cryptocurrencies as part of the COVID bubble. But now that they are shooting up for a third time, everyone is realising that the success of cryptocurrencies is sustainable and needs to be addressed. That is why we are seeing BlackRock, Goldman Sachs, PayPal and global tech funds looking at how to integrate cryptocurrencies into their day-to-day activities.

COLIN&CIE: Dragonfly Capital invested venture capital totalling USD 650 million in the crypto trading platform Coinbase in May 2024. Since 2018, your purchases of digital assets have totalled around USD 1 billion. Who are the investors and what are their objectives?

HASEEB QURESHI: We have a diverse investor base in the US and Asia, with a mix of sovereign wealth funds, university endowments, family offices, foundations and corporations. For many of them, our fund is their first exposure to digital assets, while others are more experienced and have other investments in the sector. Our aim is to be the best link between investors/capital providers and capital-seeking, young companies in the blockchain and crypto sector. Our investments are inevitably risky and volatile - this applies to all investments in start-ups and especially cryptocurrencies. But of course, the returns can be substantial, which is why so many institutional investors are now discovering this sector.

COLIN&CIE: What is the key to the future success of digital investments and cryptocurrencies?

HASEEB QURESHI: The crypto industry is no different to any other industry - it needs great founders, a strong talent pipeline and the right regulatory environment that encourages innovation. After the collapse of FTX two years ago, certain countries, especially the US, took an aggressive stance towards t the crypto industry. But this policy is now altering and with the emergence of Bitcoin ETFs, the most successful ETF placements in the history of financial markets, we are seeing a change in sentiment from both institutional investors and US regulators.

In the short term, the macroeconomy affects cryptocurrencies like anything else. Crypto is a risky asset class, and as anything risky, it reacts to a change in interest rates. The fundamentals remain strong though. The number of active blockchain users has grown steadily and transaction size has increased steadily. The underlying trends that point to an increasing acceptance of cryptocurrencies are happening in real time, fills me with confidence for the medium to long-term development of digital assets.

COLIN&CIE: Cryptocurrencies for private investors are considered highly risky and speculative in financial circles. The financial supervisory authorities of the European Union warn of risks such as product complexity, extreme price fluctuations and the risk of fraud and hacker attacks. Are cryptocurrencies suitable for this group of investors and, if so, how should a private investor invest in digital assets? 

HASEEB QURESHI: Investing in individual cryptocurrencies is indeed tricky and risky. Apart from Bitcoin and Ethereum, I am not sure whether other cryptocurrencies will remain relevant. In my opinion, the current situation in the blockchain and crypto sector is comparable to the strong expansion of the internet from 2004 onwards. Back then, there was no question that the internet would be of crucial importance. The only open question was which companies (Cisco, Intel or Amazon) would be among the winners.

Cryptocurrencies are promising, but it is still a complex area that requires in-depth knowledge and experience. I therefore recommend that private investors invest in fund managers who have many years of extensive expertise in this area via asset management mandates. Fund managers who invest in the upcoming generation of technologies from which the next Bitcoins and Ethereums may develop.

COLIN&CIE: Thank you for the interview, we wish you and your company continued success.

ABOUT HASEEB QURESHI: Haseeb Qureshi is a Managing Partner at Dragonfly and a long-time technology-focused crypto investor. He was previously a General Partner at Metastable Capital (since acquired by Dragonfly). Prior to that, Haseeb Qureshi founded a stablecoin startup, was a blockchain engineer at Earn.com (acquired by Coinbase), an anti-fraud engineer at Airbnb, and formerly a top 10 professional poker player in the world rankings. He has taught a class on web3 entrepreneurship at UC Berkeley and is widely known for his technical expertise in crypto.

ABOUT DRAGONFLY CAPITAL: Dragonfly Capital is a global crypto venture capital and research firm. The firm invests in seed, venture and growth-stage companies across the blockchain and crypto ecosystem, Dragonfly leverages its global market knowledge, global empirical research and diversity of financial, technical and operational experts to provide the most innovative crypto companies with the strategies, relationships and tools for lasting success. Founded in 2018, Dragonfly operates in 12 countries and has $2.5 billion in assets under management. For more information, visit https://www.dragonfly.xyz.

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This publication was produced by the Investment Office of the Colin&Cie Group. The information and opinions contained in this document are based on sources we believe to be reliable. However, we cannot guarantee the reliability, completeness or correctness of these sources. All information and quoted rates are only up-to-date at the time of this publication and are subject to change at any time without notice. The content is based on numerous assumptions made by the Colin & Cie Group. It should be noted that different assumptions can lead to materially different results. The forecasts and assessments are only current at the time this publication is prepared and can change at any time without prior notice. Past performance of an investment is not a guarantee of future results. Certain investments can experience sudden and substantial losses in value. This information and views do not constitute a solicitation, offer or recommendation to buy or sell investment instruments or to carry out any other transactions. We recommend interested investors to consult their personal advisor before making decisions on the basis of this document so that personal investment goals, financial situation, individual needs and risk profile as well as further information can be duly taken into account as part of a comprehensive consultation. The information contained in this publication is marketing material that is distributed for advertising purposes only.