Bitcoin ‘the most blue-chip crypto’ amid crash, venture capitalist says

Future Perfect Ventures Founder Jalak Jobanputra joins Yahoo Finance Live to discuss bitcoin falling over 30%, the crypto recovery, and the outlook for cryptocurrencies.

Video transcript

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- Cryptocurrencies have been slammed this week, with Bitcoin nearing that $20,000 level. So is this the bottom or just the beginning of the crypto winter? Future Perfect Ventures founder and CEO Jalak Jobanputra joins us here today. Jalak, great to have you here with us. All right, so are we beginning? Are we in the throes of a crypto winter? Where are we at?

JALAK JOBANPUTRA: Well, it's good to be here again. I would safely say that we are in the throes of a crypto winter. I mean, we just saw the chart on Bitcoin. Bitcoin was already being hit by the larger risk off macro environment that we've seen in the markets. And then within crypto over the last month, we've seen a number of companies that are more involved in the decentralized finance, the algorithmic stablecoin sector come under pressure with-- I would say, you know, due to risk management practices that were questionable. And that's just created more and more pressure on Bitcoin as well as other cryptocurrencies.

- So, Jalak, how cold will this crypto winter get? Are we talking Bitcoin 10,000 as investors lose more confidence?

JALAK JOBANPUTRA: Well, what's been interesting is that we've seen Bitcoin hold at that 20,000 mark. And certainly, it's come down. But if you see that last bit of your chart, it is kind of holding stable there. So, you know, I can't say that it's not going to go below that. But we're certainly seeing that to be a support mark. Ethereum has been, I'd say, more hit by some of these DeFi protocols and these DeFi funds, almost, you know, nearing liquidation.

And so Bitcoin has still, you know, been holding up relatively speaking. That's not to say-- I mean, it's down over 70%, so we certainly have seen a big drop there. But as we get back to, you know, figuring out what happened with Celsius, with Three Arrows Capital, and some of these other DeFi funds and protocols, a lot of them are talking to, you know, Citibank and figuring out some restructuring. I think there's still a lot of uncertainty there. And once we see more clarity there, hopefully, we'll start to see some recovery in at least the cryptos that are solid in terms of their fundamentals.

- How low could Bitcoin go, though, realistically?

JALAK JOBANPUTRA: Look, I mean, we saw it go down to 3,000 in March, 2020 or near there. I don't think we'll see those levels again frankly because we've seen a lot of institutional money come into the market. Lots of dollars have entered since that point. I think if we take a step back, the run-up in Bitcoin and the reason a lot of institutions are investing in Bitcoin is as an inflation hedge. We still have that macro environment.

I just think recently, Bitcoin's been hit by some of the other, you know, cryptos and being kind of lumped into some of the risk that's been associated with some of these other cryptos. So I don't see it going down to that level. I see good support where we are at 20k. I mean, of course, if we see more contagion within the crypto markets and more funds start to fail, that could change. But I still think of it as, you know, a blue chip or the most blue chip crypto that is not as exposed to, you know, some of these questionable risk management practices of some of these DeFi protocols.

- If someone has built a portfolio, Jalak, around cryptocurrencies and they're down 70 or 80%, what should they be doing right now?

JALAK JOBANPUTRA: Yeah, I've always said that, you know, this is an emerging early asset class. You should never put in more than you're willing to risk. And I stand by that. I think you have to look at your overall portfolio. You know, if you need liquidity, I would say then you need to go find where that liquidity is. We have been holding on to our Bitcoin specifically because we do believe in it.

And what we found over the years-- and Future Perfect has been involved in the space. We're early stage investors, but we do have some exposure to liquid cryptos. We have held on. And we did have a solid entry points. But when we've seen these crypto winters, we have seen recovery, especially amongst these blue chip cryptos.

- In terms of the head count, this crypto winter, it is taking a toll on companies like BlockFi, companies like Coinbase. You were tweeting about this this week as well. With some of the layoffs that had come forth from these companies in crypto, Robinhood had actually already done some of their layoffs prior to this most recent leg lower. Do you expect more of the headcount reductions to take place as a result of this leg lower, this most recent move lower and downturn in crypto prices over the past two weeks?

JALAK JOBANPUTRA: Yes, undoubtedly. And we're seeing this in the broader tech sector too. Evaluations had gone very high and ahead of themselves because of what we were seeing in the public markets. And some of the private valuations were even higher than some of the public markets. So, yeah, those had to stabilize. And along with those higher valuations, more money coming into these companies, hiring was really taking off ahead of growth and future growth.

So, you know, something that Brian Armstrong from Coinbase said this week that they hired. You know, it was a mistake to hire as much as they did ahead of the growth. I mean, these companies often, you know, saw these spurts of growth in crypto and were taken aback by them and didn't have the personnel to manage some of that growth. So I think this time around, they over-hired.

And they're seeing the repercussions of that. And we don't know how long the crypto winter will last this time around. So I think they're just being conservative. And obviously, Coinbase is a public company and has more scrutiny because it is. But the rest of the sector is certainly taking note of that and they're restructuring accordingly.

- Future Perfect Ventures founder and CEO Jalak Jobanputra, always good to see you. Have a good weekend.

JALAK JOBANPUTRA: Thank you. You too. Take care.