Venture capital investments in the digital asset and DLT economy of the future

Current developments at coinIX and in the digital asset and DLT economy

Mr. Schildt, first of all we have a personal question for you. On November 1, 2023, you became CEO of coinIX, having previously served as Chairman of the Supervisory Board since 2017. In your new role, you have considerable scope for shaping the company’s development. What topics are you going to focus on for coinIX in the next five years?

Blockchain technology, along with the underlying concept of decentralized data storage, is a relatively new trend. Drawing a parallel to the Internet’s evolution, the current stage of development corresponds to the year 1998.

At that time, Amazon launched the first online bookstore, thereby laying the groundwork for today’s e-commerce. Nevertheless, this analogy also underscores the pivotal significance the upcoming five years may have in shaping the next wave of digital transformation. Our primary objective is to identify the key trends and allow our shareholders to participate in these trends early on through intelligent investments.

Blockchain offers a wide range of applications, both in the financial sector and in the real economy. Our company’s stock gives investors an opportunity to engage with the potential of these emerging developments through a diversified portfolio spanning the entire blockchain value chain.

After the 2022 crypto market downturn, several favorable trends have surfaced since mid-last year. These include the approximately 200% recovery in Bitcoin prices and the approval of Bitcoin ETFs in the USA. How does coinIX benefit from these developments?

The resurgence of Bitcoin prices and the endorsement of Bitcoin ETFs significantly alleviate lingering hesitations – particularly within the financial sector – regarding investments in crypto assets and blockchain utilization. Those asserting that Bitcoin lacks intrinsic value and is thus worthless must recognize that an asset’s worth hinges on supply and demand dynamics, rather than inherent properties.

Bitcoin’s capacity to swiftly, securely and transparently transfer value between wallets without intermediaries or human intervention holds immense promise. Bitcoin is also a component of the coinIX portfolio, so the value of our portfolio is benefiting from the positive news.

Nevertheless, in my view, Bitcoin is something of a dinosaur among cryptocurrencies. Despite retaining the highest market capitalization, it is actually also the most sluggish representative of its kind and possibly the one that will be the first to die out. To me, blockchain technology is much more than just Bitcoin.

Investments in the digital asset and DLT economy

Beyond these favorable trends, the digital asset and DLT economy has experienced robust technological advancements, resulting in an increased offering of novel digital asset services. In the investment process, which sectors and attributes of digital asset companies do you prioritize? Additionally, which business models along the value chain, such as custody and brokerage services, do you perceive as having significant potential?

Similar to the early days of the Internet, numerous companies and projects now secure funding through a blend of traditional venture capital and increasingly token issuance, thereby offering diverse investment opportunities.

We emphasize that blockchain should not just be built into a project as a gimmick, but that decentralized structures should be leveraged to actively engage the user and stakeholder community. Then it’s about usability in the mass market and the scalability of the solution.

Important topics include tokenization, i.e. the digital representation of assets as tokens, digital supply chain tracking and documentation, and the utilization of blockchain to verify data which is used to train artificial intelligence, among other things. As early investors, we specifically targeted tokenization early on and currently hold stakes in three companies specializing in the digitalization of securities.

Ongoing development of the blockchain infrastructure coincides with the emergence of new services, such as staking, crypto lending and crypto tax solutions, each harboring substantial growth prospects. There is a lot going on – beyond simply acquiring and holding cryptocurrencies, you can actively generate continuous income through various avenues, i.e. by investing the cryptocurrencies at interest.

The most well-known practice is staking, wherein crypto assets are utilized to maintain the functionality of the underlying blockchain. After initially relying on external providers, coinIX is now a validator in its own right. This form of self-staking enables us to avoid counterparty and default risk. Furthermore, risks related to platforms, governance, and smart contracts, commonly linked to institutional node operators or staking pools, are diminished.

These new forms of DeFi – the decentralized financial world – inherently necessitate tools for portfolio management, monitoring and, finally, assistance in preparing data for the tax authorities. Blockpit, the leading provider of tax software for crypto investors in Germany, is a portfolio company of coinIX.

Outlook for the digital asset and DLT economy

Everyone is currently talking about tokenization, and financial titans like Larry Fink (CEO of BlackRock) last year attributed tokenization with immense potential for lasting disruption in the financial markets. What potential do you see in tokenization and which asset classes do you think are suitable token candidates?

As previously mentioned, we have recognized the significant potential for tokenization to revolutionize traditional financial markets. Tokenization offers increased liquidity, fractional ownership, improved access and enhanced transparency in transactions, making it a highly attractive option for a wide range of asset classes. In particular, we consider real estate, venture capital, private equity and art as asset classes that are particularly well-suited for tokenization due to their high value, illiquidity and potential for fractional ownership. By tokenizing these assets, we can open up new investment opportunities, streamline processes and democratize access to previously exclusive markets.

TokenForge and FINEXITY are two of our company profiles that specialize in tokenization. TokenForge is a Berlin-based technology provider offering its customers a software toolkit that enables legally compliant, fully digital and programming-free tokenization of assets. FINEXITY offers blockchain solutions that allow users to invest in high-value assets without purchasing the entire asset. This means that even small investors can acquire fractions of assets using tokenization technology.

One last question for you: After talking at length about recent developments in coinIX, venture capital crypto investments and tokenization, we are also interested in your outlook on the digital asset and DLT economy. What do you think the crypto market will look like in 2024 and what changes do you expect by 2030? We would also like to hear your assessment of how these changes will shape the traditional financial industry.

As expected, the US regulators confirmed in early 2024 that Bitcoin ETFs are generally admissible. This will lead to increased demand for Bitcoin in the short and medium term, which will also contribute to price increases for other cryptocurrencies. Positive signals from the traditional financial world will have a positive impact on the crypto market, too. The Federal Reserve may lower key interest rates in March 2024, which could significantly help the crypto market to achieve new price gains.

The anticipation of the upcoming halving event in April/May 2024 serves as an additional boost for the rise of the Bitcoin price. This event takes place every four years and results in the halving of Bitcoin mining rewards, effectively limiting the Bitcoin supply available to miners. Previous cycles suggest that Bitcoin may experience a surge before and after the next halving event.

Looking ahead to 2030, the crypto market holds immense promise for growth and transformation. With increasing acceptance and mainstream integration, crypto assets are becoming an integral part of global financial systems. Technological advances, regulatory clarity and institutional engagement are likely to contribute to the market’s maturity and stability. We anticipate ongoing innovation in blockchain technology to enhance transaction speed, security and scalability.

The emergence of decentralized finance (DeFi) and non-fungible tokens (NFTs) will diversify the applications of digital assets and open up new opportunities for investors and businesses. While challenges such as regulatory scrutiny and market volatility may remain, the evolution of the crypto market points to continued expansion and integration into the traditional financial world that will shape the financial industry in the years to come.

Thank you very much, Mr. Schildt, for sharing your insights and opinions in this interview. We wish you every success on your future journey with coinIX!