Stable Crypto-Corns – The New NFT For India
The need for stability is the underlying challenge with both cryptocurrency as well as unicorns, writes Sandeep Murthy.
BloombergQuint was kind enough to invite me to express my thoughts on cryptocurrency… as I took some time to reflect, research and put together some coherent words, the world had moved on and suddenly India is producing unicorns like they are growing on trees. This became the new topic of choice. The process of thinking about both of these led me to a different topic – the need for stability. This point actually underlies the challenge I see with both cryptocurrency and unicorns; but more on that later.
Still An Asset, Not Yet Currency
First, let’s talk about bitcoin. To talk about bitcoin, we need to first accept some basic principles about money as we know it.
- One – money is really useful. You can buy things with it. Before it, we lived in a barter world, which was very difficult to manage (“that’ll be 4 rabbits for a boar”).
- Two – it’s a tool for governing. Economies are an integral part of society (“It’s the economy, stupid”) and politicians know this. Money is a key tool that governments use to manage the economy. It is debatable as to whether they do a good job with it or not, but it is a tool that they loathe to give up.
- Three – it’s a measure of success. Everyone uses money and sees it as a measure of progress in their lives.
Given these three realities, removing money from our daily lives is going to be a task. Given the extreme volatility in crypto today, it will be hard to see it as a useful tool to buy things.
Crypto value is either increasing or decreasing with such large swings that pricing real-world products with it is more art than science.
Governments are accepting that digital currencies bring tremendous benefits (tracking being a huge one), so they are bound to embrace the digital currency world, it’s just unlikely that they will cede control of that world to an algorithm.
Finally, given the entrenched nature of money in measuring our progress in society, people will look for whatever new tool comes about to provide that same ability to measure individual success. Crypto is not unlike the internet in 1994. Back then people could not have imagined that nearly 30 years on we would be walking around with computers in our pocket and using the internet to send messages and videos, buy goods, services, and financial products or manage our healthcare and even get educated online. Until last year we couldn’t imagine that school and work would be conducted on the internet for an entire year. So crypto has the potential to change the way the world works, but it is unlikely that we will know how that will happen, for a while.
Crypto is currently best viewed as a commodity or a piece of art whose value is driven entirely by supply and demand forces that seemingly come and go… sometimes based on the tweets of influential people. Until there is some stability in the movement of the value of crypto there will not be enough usefulness, governing capability, or success measurability. Till then, we play crypto as an asset and have it as part of a diversified portfolio with the relevant risk-adjusted weightage.
Unicorns, Fairy Tales, And Hangovers
Another world that needs such stability is that of unicorns. There’s a lot of liquidity in the world today, but also a palatable shift towards tech-driven consumption. These two things combined with investors’ undeniable FOMO means we are ripe for good valuations.
The birth of numerous unicorns is interesting because it means that these new creatures are laden with fresh capital to drive change in consumer behavior. Covid-19 has been a natural accelerant of this change. It did what it took Flipkart and Amazon billions of dollars over many years to do – it got my parents to order online.
The acceleration won’t be uniform and not all of the newly minted “corns” are going to live to fly into the sky, but they will serve the noble purpose of driving consumer change and sow the seeds for new animals to emerge… perhaps a few dragons as well.
This mythological farm party is great as long as the markets are going up and governments are printing money. But eventually, the music will stop.
And when it does, there will be a massive thud and a big hangover will ensue. Investors and entrepreneurs will act like they never thought it was possible. Some funds will die, some entrepreneurs will shut shop and some mythical characters will return to their fairy tale novels. But the real problem arises when those that were watching the party from the outside (and in many cases funding it for option value), will begin to believe that India is too risky and lacks stability. We will be stuck in a dry spell, or a cold winter, for a while.
This is the circle of life for those born into the jungle of the unicorns. While we may want to talk about cryptocurrencies or flying horses, we should focus on finding stability through sustainable exponential growth. Everything else is noise… it’s really fun, attractive, entertaining noise, but it’s still noise and we should recognise it for what it is. Acknowledge that it has an important role to play, but return our focus to the businesses that are creating real customer value through hard product differentiation. I hope I get invited back to talk more about that.
Sandeep Murthy is Partner at Lightbox, a venture capital firm that makes investments in early-stage consumer technology businesses based in India.
The views expressed here are those of the author’s and do not necessarily represent the views of BloombergQuint or its editorial team.