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Crypto bank Anchorage's co-founder says most institutions have multicoin portfolios, even if they only discuss bitcoin publicly. He shares 2 reasons whyand 6 areas of DeFi he's excited about.

Published by Business Insider on Sun, 18 Jul 2021


<p><img src="https://static4.businessinsider.com/image/60f11700bb790e0018207e63-438-329/Diogo-HeadShot.png" border="0" alt="Diogo Monica" width="438" height="329" data-mce-source="Anchorage Digital"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>In January of this year, a milestone was reached in the crypto world when <a href="https://www.anchorage.com/">Anchorage Digital</a> became the first federally chartered crypto bank in the United States.</p><p>Launched in 2017, Anchorage aimed to meet the growing need of institutional crypto custody. Now, it's transformed into a <a href="https://www.anchorage.com/use-cases/">full-service crypto banking provider</a> offering institutions services from custody to staking and trading.</p><p>"The mission of Anchorage is to really be this portal between traditional finance with our charter and crypto with our technology," said Diogo Mnica, co-founder and president of Anchorage.</p><p>The charter, which is <a href="https://www.occ.gov/topics/laws-regulations/occ-regulations/index-occ-regulations.html">regulated by the OCC</a>, puts Anchorage on a level playing field with financial institutions, such as Bank of America and Goldman Sachs, in terms of regulatory scrutiny.</p><p>Since receiving the charter six months ago, a lot has changed in the crypto world.&nbsp;</p><p>A tremendous bull run kicked off early this year, with more institutions coming on board and <a href="https://markets.businessinsider.com/currencies/btc-usd">bitcoin (BTC)</a> hitting an all time high above $64,800.</p><p>But within a couple weeks, bitcoin and other cryptocurrencies dropped more than 50% due to concerns over increased regulation, particularly in China.&nbsp;</p><p>Bitcoin currently trades around $31,900.</p><p>Insider spoke with Mnica to find out how institutional crypto appetite has been at Anchorage amid the volatility. He also unpacked the firm's foray into DeFi, and laid out six key areas to watch.</p><h2>Institutional appetite</h2><p>"As prices started coming down, we got more and more calls for people to increase the credit limit, so they could buy more," Mnica said. "They're looking at it as either a great entry point, if they are investors &nbsp; and for a large majority of our clients that are just building into space, nothing has changed."</p><p>Most of the institutions have 10- to 20-year horizons. They think about volatility very differently, Mnica said.</p><p>Some are building out projects, Mnica said, which can take between two to three years to build and a minimum of a year to get to market.</p><p>"None of these [projects] have stopped or decreased in priority because of any price action in the market," said Mnica, describing "very ambitious" crypto projects being undertaken by fintechs, bulge bracket banks and exchanges.</p><h2>Branching into DeFi</h2><p>Anchorage has recently branched into staking, lending and trading services. Most of which link into the Decentralized Finance (DeFi) ecosytem.</p><p>"We've also seen our clients in a big way, shifting their portfolios and broadening their investment horizon to also include DeFi,"&nbsp; Mnica said.</p><p>DeFi projects aim to remove financial intermediaries and enable direct transactions between two parties. The projects often raise funds and provide governance through the issuing of crypto tokens. For example, ether is the native token of the ethereum blockchain.</p><p>"There are very few clients of Anchorage that only have bitcoin, very, very few," Mnica said,&nbsp; "All of them have a multicoin portfolio, even if externally, they only talk about bitcoin, many of them are actually investing in these new projects."</p><p>This is for two reasons:</p><h4>1) The potential of DeFi</h4><p>Institutions are recognizing that DeFi is one of the most exciting things to come out of crypto and want to be aligned there, Mnica said.</p><h4>2) Token exposure</h4><p>Some institutions make venture investments. To invest in this space, they must gain exposure via tokens rather than equity.&nbsp;</p><p>This echoes venture capitalist Michael Anderson's <a href="https://www.businessinsider.com/crypto-investing-vc-framework-ventures-defi-ethereum-chainlink-michael-anderson-2021-7">recent outlook</a> on how investors' mindsets will have to shift to understand Decentralized Autonomous Organizations (DAOs).</p><h2>6 DeFi areas to watch</h2><p>Mnica spends a lot of his spare time looking into investigating the DeFi space.&nbsp;</p><p>"It's even hard for somebody that spends 120% of their time in the crypto ecosystem to really stay on top of everything that is happening [in DeFi]," Mnica said.</p><p>He breaks down 6 areas of the market that excites him.</p><h4>1) Growth of stable coins</h4><p>"Both DAI proving itself as a solid and DeFi stable coin to even the growth of stable coins like USDC that have gained tonnes of traction in terms of integration," Mnica said.</p><h4>2) NFTs</h4><p>Mnica is excited about NFT networks like <a href="https://www.onflow.org/">Flow</a>, which make it easier to participate in the creation of NFT marketplaces.&nbsp;</p><h4>3) Decentralized insurance</h4><p>Companies like <a href="https://nexusmutual.io/">NexusMutual</a> are providing completely new ways to access insurance markets.</p><p>"Now we have the ability of actually insuring and participating in the upside, and obviously the downside of participating in the insurance markets." Mnica said.</p><h4>4) Yield generating stable coins</h4><p>Yield generating stable coins will be versions of the US dollar that will automatically generate yield. Mnica compares this to a yield generating checking account.</p><p>"There's no way for you to hold this asset without generating interest, there's no product that you need to opt in [to],"&nbsp; Mnica said. "... [just] by holding it allows you to generate interest."</p><h4>5) Fiat less banks</h4><p>"I think you're gonna see the rise of the Fiat less bank in 2021, if not 2022," Mnica said.</p><p>These companies will provide banking services, fundraise and pay salaries via stable coins. They provide apps on phones containing yield bearing stable coins as checking accounts. Individuals would then be able to leverage Visa cards to swipe and spend stable coins from the app wallet as well as the bank being able to natively settle via Visa.</p><p>"At no point does this institution ever, ever touch fiat," Mnica said. "This is incredibly exciting."</p><h4>6) Robo advisors&nbsp;</h4><p>He also expects robot advisors to make it easier to play in DeFi markets, which are known for not being user friendly.</p><p><a href="https://www.businessinsider.com/defi-crypto-investing-strategy-institutions-multicoin-anchorage-bank-diogo-monica-2021-7#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/how-tick-bite-can-make-you-allergic-red-meat-2018-8">One bite from this tick could ruin red meat for youor even kill you</a></p>
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