hit counter

Crypto Winter is the Time to Invest: Animoca Brands Crypto Analyst

  • Mehdi Farooq is an Analyst at Animoca Brands.
  • Farooq explained why savvy investors can benefit from undervalued crypto assets right now.
  • He explains why Bitcoin’s current price is fair and why Polygon will soar.

Between massive layoffs at seemingly stable companies, projects collapsing with investors bearing the burden, and the overall market collapsing, many investors are fed up with the crypto winter.

However, according to Mehdi Farooq, an analyst at Animoca Brands — the powerhouse behind crypto projects like The Sandbox — now is exactly the right time to capitalize on undervalued cryptocurrencies.

In a recent interview with Insider, he explained why he believes Bitcoin can still be considered a store of value and pointed out a few crypto projects he’s still a fan of.

Why bitcoin is a store of value

A popular investment thesis for bitcoin is that it serves as a store of value to hedge against inflation, as there will never be more than 21 million bitcoins.

However, this thesis does not seem to hold up. As the market enters record-high inflation, Bitcoin’s value has plummeted – falling from $46,800 in January 2022 to below $24,000 today.

But Farooq believes this cash value is fair and actually backs the thesis of Bitcoin as a store of value.

“I have a feeling that Millennials and Gen Z have an appetite for a new form of gold to resonate with that they believe is web3 native and will be the anchor point of all upcoming asset classes,” Farooq said. “So because of that narrative, it will still have value and capture some market share from gold.”

When Farooq calls Bitcoin an “anchor,” he means that other tokens use Bitcoin in some way. For example, if Coinbase users want to buy a crypto that is not available on the platform, they can send their bitcoin to another exchange where they can buy the crypto they are interested in.

In other words, Bitcoin acts as a bridge for users looking to buy other cryptocurrencies and will remain relevant even as newer cryptos come online or blockchain projects start using other tokens.

“Well, I think at $20,000 to $30,000 the valuation will be around $1 trillion,” Farooq said of Bitcoin’s price. “So that’s about 10% to 15% of gold’s market share, which I think is fairly valued given the risk to me.”

Where to invest in crypto winter?

While Farooq believes Bitcoin is fairly priced, he believes the crypto winter is an opportune time for investors to buy undervalued crypto companies.

Farooq noted that cryptocurrencies are inherently risky and risky assets are naturally being hurt by Federal Reserve policies right now. The Fed’s method of stopping inflation is by raising interest rates, which reduces investor risk appetite, and stocks and cryptocurrency prices suffer as a result.

But that’s more a matter of timing than issues with the risky assets themselves, Farooq says — and that creates an opportunity for sophisticated investors.

“To me, this creates a perfect environment for long-term investors to actually capitalize on this discrepancy,” Farooq said.

He continued, “For investors with a risk appetite and a three to five year time horizon, it will be a unique opportunity to snap up some of these growth assets at a cheaper valuation.”

Farooq proposes Polygon as a project that he believes will only increase in value over the next few years. Farooq says that by investing in Polygon’s Matic token, an investor will get “index-level exposure” to not only NFTs but also promising crypto sectors like gaming and the metaverse.

He gave three specific reasons he’s bullish on Polygon.

1) Partnerships with Web2 companies

Farooq’s primary reason for his bullish stance on Polygon is his strong partnerships with industry-leading companies.

“All Web2 companies entering the Web3 space use matic. Disney, for example, chose Polygon for their Web3 accelerator program,” said Farooq.

In fact, Polygon was the only crypto company selected by Disney for its 2022 accelerator program.

He continued, “They had Facebook, which uses matic for Instagram, and Draftkings, a sports betting company, they all work with matic.”

Other well-known companies that Polygon has partnerships with include Macy’s, Stripe, and Adobe.

2) High beta move on ETH merger

Farooq believes Polygon is well positioned to benefit from the upcoming Ethereum merger. The upcoming merger, scheduled for September 2022, will switch Ethereum’s blockchain from proof-of-stake to proof-of-work. While Ethereum’s ether cryptocurrency has already started rising in anticipation of the event, Farooq believes Polygon will also benefit from the merger.

“They are building seven products at ETH. So they have a sevenfold advantage when it comes to playing them,” Farooq said.

He specifically named the “Avail”, “Hermez” and “Zero” polygon projects as promising Ethereum polygon projects.

3) Uses Indian talent

Finally, Farooq believes that Polygon, an India-based company, has a strategic advantage over other crypto companies when it comes to attracting Indian blockchain talent.

India is a tech powerhouse. According to the National Science Foundation’s 2018 Science and Engineering Indicators Report, India produces about 1.8 million engineering graduates annually – or in other words, about 25% of the world’s engineers come from India.

While Farooq believes Polygon is strategically positioned to capture this intellectual asset, Polygon founder Sandeep Nailwal believes the country is at risk of a “mass flight” of its crypto talent due to the country’s hostile attitude towards digital assets is.

Leave a Comment