Invezz interview: Digital asset manager 3iQ says this is the future of crypto

It’s safe to say that 2024 has been the year of cryptocurrencies so far. After a long crypto winter, digital currencies burst back into the limelight at the start of the year, before being rocketed into the stratosphere by the SEC’s Bitcoin ETF approvals that same month.

Similarly, 3iQ started off the year with a bang, thanks to Monex, the Japanese financial group that owns Japan’s largest digital exchange, Coinex, acquiring a majority stake in 3iQ during December 2023.

3iQ is a Canadian digital asset management trailblazer, which is transforming digital assets’ management with a hedge fund-like approach to building diversified, risk-balanced crypto portfolios.

We spoke to 3iQ’s CEO, Pascal St. Jean, and its new senior advisor, Matteo Dante Perruccio, a veteran of the buy side with 35+ years’ experience, about their vision for the future of crypto. Edited excerpts:

Invezz: How do you see the crypto landscape changing in the next 3 to 6 months? Any predictions for where we’ll end up by end 2024?

St. Jean: I tend to stay away from making price predictions. Personally, what I like to talk about is the dominos that need to fall. Regulation, the maturity of the infrastructure, regulatory clarity, big players coming into the space… all these things are happening and so it’s all moving in the right direction.

Both retail and advisors and institutions are becoming more comfortable, which means more money coming into the space. And when more money comes into the space, multiply that with a finite asset class we see, of course, momentum to the upside.

That being said, when there is macro risk, when there is global insecurity from an economic perspective, things tend to go down. Which is why I don’t like to predict price, but in terms of dominos – overall, the dominos are currently falling in the right direction.

Speaking of that, what does the digital asset sector need to do in order to see more institutional adoption?

St Jean: The first thing is clear regulation, and we’re starting to see that in multiple jurisdictions.

As I’ve said before, the FTX moment and the Binance ruling recently– as much as it hurt the price, and crypto winter happened, it was needed.

We need mature, regulated infrastructure. We need pipes and plumbing that aren’t just a bunch of roaming startups. We need companies that are regulated that understand what ‘TradFi’ (traditional finance) is looking for and aren’t doing any funny business. And we’re seeing more of that coming through.

Then, we need strong balance sheets. So, institutions if they want to invest into the underlying asset, they need companies with strong balance sheets like Coinbase, like BlackRock that’s now in the space now, and companies like 3iQ

So, is this the ‘hedge-fundification’ of crypto?

Perruccio: I had a long career in traditional asset management and alternative asset management. And I became disillusioned with the industry. There were the same conversations over and over, about things like fees and ‘active versus passive’… I was interested to see, at the time, that the fastest-growing segment was private asset management and ultra-high net worth asset management. Often, these ‘new’ spaces are the places where innovation happens.

Back in 2017 or 2018, a friend contacted me and wanted to build a hedge fund management platform. At the time, I didn’t believe in crypto at all! That was based on my own aversion to change. But a lightbulb eventually went off for me then, that this is the future of financial management.

There were many of the same arguments when hedge funds first started – and that was also high risk! But then we created a framework of trust.

St. Jean: As much as we love Bitcoin, the reality is we need to diversify the investable strategies that institutions are looking for. They are looking for enhanced returns, yield opportunities that are liquid. They’re looking for diversification of risk.

Now this, along with more transparency on fees, is something that currently doesn’t exist in the crypto space – because they’re all fund of funds. So we’re the first to have solved for that… the mandate is to create risk diversification multi-manager, multi strategy.

You’re speaking about 3iQ’s QMAP managed account platform, which Monex also injected funds into. Tell us more about QMAP.

St. Jean: Our QMAP system creates transparency of fees, creates reduction of operational risk and you have maximum diversification you have multiple managers, multiple strategies and so what ends up happening is really interesting returns.

So, if you look at our DAP portfolio (our digital asset portfolio), the goal is not to beat Bitcoin, the goal is to beat the S&P 500 with lower volatility and less correlation. And we’ve done that.

You see some people go into super high risk junk bonds just because they’re ‘traditional’. We can generate higher returns in the digital asset space, with less risk, with complete liquidity, in the digital asset space.

Perruccio: The very concept and philosophy of QMAP is based on the belief that investors will need institutional quality, due-diligenced and risk managed diversified exposure to digital assets.

3iQ is uniquely positioned, with its strong institutional backing from Monex Group as well as its history of innovation in the regulated digital asset ecosystem. And we have a strong conviction that the transition from traditional finance to digital finance must be accompanied by education and supported by a collaborative knowledgeable team like 3iQ.

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