By Rahul Kumar
With Bitcoin reaching a record high of US $40,000, there is fresh media attention on the whole crypto subject. Once called the riskiest asset is now the hottest and is regarded as the heir to the gold. The new enthusiasm from the younger investors is driving the rally. The asset has gained nearly 300 per cent this year.
The younger and novel investors are regarding Bitcoin as a revolution in the financial system. Unlike other investments, crypto is not tied to the government-issued currency. Bitcoin is an autonomous piece of software that has no owner per se. The finiteness of Bitcoin is the key temptation for most of the investors; there will be no more than 21 million Bitcoin in circulation. Hence, it shows itself as the natural hedge against inflation similar to Gold.
During global lockdown amid coronavirus spread, the Central banks shoved the interest rates to zero to devalue their currency, the investors found their new solace in Bitcoin. This is something people are piling up their trust in. The younger generation is smarter and is up for riskier assets.
The crypto market is now more sophisticated and has more investors than when Bitcoin touched its previous high of US $19,000 in December 2017. What this all means that in the coming days, we may have less volatile Bitcoin, which will rightfully fit in the portfolio of sophisticated investors for long-term holding.
It’s not very long ago that crypto markets battled in India; the Indian government took a formidable stand to accept Blockchain but rejected crypto as a legal investment or a legal tender. In March 2020, the Supreme Court intervened in the matter and gave crypto investors a reason to joy and cheer. There is still confusion if the BJP-led government will make a law against crypto and kill all the new birds with a single stone.
The Indian crypto market is small but promising. Investors are willing to take the risk, and Bitcoin has become a synonym to the crypto markets.
EGW Capital, USA, is trying hard to bring crypto and Tokenization to India. The concept of Tokenization is something that the company truly believes in. Tokenization is the digital representation of assets on the Blockchain similar to shares, which represent the ownership. Then what is the difference between the shares and the tokens?
They are almost the same thing, but the tokens can have more reach and liquidity and can be fractionalized to the smallest digit. So we can say shares are dumb, and tokens are smart; passes can travel over the Blockchain into the crypto wallets of an investor anywhere in the world within seconds, whereas shares are mostly traded within the said boundaries of that country on the stock exchange.
The process of Tokenization gives the freedom to tokenize almost any asset on the blockchain, whether it is equity, debt, bonds, or real estate. The real estate worth millions of dollars can be tokenized into millions of tokens, which can then be bought by any class investors without any discrimination. Since Tokenization is executed over the blockchain, all the transactions done in real estate tokens can be scanned by the investors. Investors and traders can buy tokens from anywhere in the world with help of fiat or Bitcoin itself. Hence it amplifies the liquidity.
The debt issuers, on the other hand, can issue their debt tokens, which can be bought by the investors in the countries with zero or low-interest rates, thus bringing in the capital at a lower cost as compared to India.
Rahul Kumar, the CEO of EGW Capital, said, “In the coming days, the stock exchanges will become extinct like we saw physical stock markets vanishing from this modern era. The tokenization will take over; the shares will be replaced with tokens, representing ownership. Your dividend will be paid in cryptos instead of US dollars.
This all is happening, and it’s the right time for the Indian entrepreneurs to list their companies on the crypto markets. The pricing is economical compared to the stock exchanges plus with marketing efforts, one can become a global brand”.
Such tokens that are not Bitcoin are majorly called alternative tokens or alt tokens, or altcoins. The word coins and tokens are used interchangeably in the crypto space.
EGW Capital had its share of struggle in India; when the Indian crypto markets became open in March last year, the crippling lockdown took over. EGW tokens or the tokenized equity of EGW Capital lost 43 per cent in the previous six months, all due to the covid pandemic and the problems it has brought to many businesses.
EGW Capital is worth US $800 million or Rs 6,050 crore as per its market cap. Over 40 per cent is held by Rahul Kumar, and the remainder with the clutch of investors and other key shareholders.
EGW Capital not only does the Blockchain listings but conducts standard US IPOs like Regulation A+ and reverse mergers.
The company now has a sizable number of clients and targets revenues to the tune of US $200 million by the end of 2021. If this is achieved, we may witness some action in the EGW tokens. The upside looks promising as Tokenization is the next big thing, and India may emerge as the largest market, and EGW Capital certainly has the first-mover advantage as it is the first Blockchain investment bank that forayed in India.
The EGW tokens seek a listing on the Binance crypto exchange, one of the largest and the finest retail exchanges. The utility of these tokens will be that the client will be soon able to pay their entire fee in EGW tokens, which will substantially increase the liquidity of the tokens with Tokenization gaining space. EGW Capital also has its stable coin called Reserve USD (RZE), which will be available to retail investors in 2021.
Kumar adds, “We are here to replace stock exchange listings. The new entrepreneurial blood needs something different. For the last hundreds of years, entrepreneurs struggled to raise money and build net worth. Blockchain removes its entry barrier. The global trading in the tokens ensures minimum manipulation due to deeper liquidity. In the next three years, we will see 70 per cent of the startups choosing tokenized listing of their shares instead of opting for the pricey stock exchange listings”.
EGW Capital earns by backing these listings called Initial Exchange Offering (IEO) in the crypto world. The company charges 5-15 per cent equity in these businesses. The price of taking a company public through an IEO usually costs US $250,000 or Rs 1.87 crores, which can be partly sponsored or financed by EGW Capital itself, varying from case to case basis. The marketing of IEO may cost extra capital depending on the countries which the issuer wants to target.
EGW Capital, which currently trades on BitLux OTC exchange, is proposing to conduct its own US $100 million IEO and partly sponsor the IEO’s of the companies worldwide. The IEO was delayed due to the pandemic but is slated for 2021.
EGW Capital is also aggressively expanding its market-making and liquidity provider business. The company is well-positioned to maintain healthy revenues backed by a solid bottom line.
(The views expressed are personal)