Crypto crash was ‘a blessing’, admits Sarwa founder

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• Sell-off in cryptocurrencies wiped over $200bn from market in a day
• Two thirds of UAE residents are interested in crypto investing  

Should everyone own cryptocurrencies? “No, definitely not,” Mark Chahwan, co-founder of Sarwa, told AGBI exactly a week after the investing and personal finance platform introduced the option to trade cryptocurrencies.

The firm said in a statement that Sarwa Crypto will offer commission-free trading of the world’s four most recognised cryptocurrencies – Bitcoin, Ether, Litecoin, and Bitcoin Cash – with zero transfer cost for AED local accounts, and tight spread, to give investors “a point of entry in a volatile market”.

So far, retail investors have been using the platform’s trade product to buy and sell US-listed stocks and investment products.

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Sarwa uses artificial intelligence to rate an investor’s risk tolerance and assigns them a tailored investment portfolio, charging them lower advisory fees than traditional wealth managers.

“There’s a difference between risk capacity and risk appetite. An investor’s capacity for risk may be huge, but their risk appetite might not be as large,” Chahwan said. 

“If an investor starts off in crypto, goes all in and loses half, the emotional damage could take years to recover from and rewire the fact that you can make money from investing,” he said.

“It can be destructive, so investors definitely need to start with something more conservative. And that’s where we come in and help people find the right product for them.”

Contrary to stories of overnight crypto millionaires, more than half of Bitcoin investors are in the red

Founded in 2017, Sarwa raised $15 million in a funding round last year led by Abu Dhabi’s Mubadala Investment Company.

The series B round brings the trading platform’s total funding from regional and international investors to about $25 million, the company said at the time.

Risk matters

Contrary to widespread stories of overnight crypto millionaires, as of February this year more than half of Bitcoin investors are in the red, according to a study by cryptocurrency investment firm 21Shares.

Bitcoin, the world’s most valuable cryptocurrency, has more than halved since hitting its all-time high of $69,000 in November last year.

A major sell-off in cryptocurrencies last month wiped over $200 billion of investor wealth from the market in a single day, and close to $400 billion over the last few weeks globally.

While volatility in trading digital currencies is not unusual, Chahwan said the launch of Sarwa Crypto coinciding with the market’s current wild price swings is a “blessing”.

“In some sense, I’m actually glad this happened because it’s one thing to tell an investor that there’s risk involved – and it’s another to look at the chart that speaks for itself,” he said.

Yet, with the “right mindset”, the dip also means investors looking to make the jump to crypto can celebrate because they’re buying at a cheaper price, Chahwan added.

A full view

As more retail investors look to diversify their portfolio to include cryptocurrencies, Sarwa, regulated by the Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority, works to balance caution and opportunity through its platform design and market insights. 

“The first decision we made is to include all our products under one app where people look at the different options,” Chahwan explained. 

“We also don’t shy away from saying that investing in crypto is different. It’s not like investing in something real, like a company.

“You’re betting on things that, if they happen, can be completely revolutionary. So a lot of it is explaining differences in risk profile and the actual asset.”

Opportunity costs

A 2022 YouGov study found that two thirds of UAE residents (67 percent) are interested in investing in cryptocurrencies within the next five years. 

Chahwan said Sarwa receives a “few thousand” signups each month, of which about half have been for Sarwa Crypto since its launch – a response he attributes to global macroeconomic imbalances.

“People are looking at cash in a very different way, especially when they hear of high inflation,” he said. 

Existing Sarwa users have also been ditching their fee-charging crypto exchanges and upping their account sizes because of Sarwa Crypto’s commission free model, Chahwan said.

Asked if he agreed with global headlines claiming the high-risk nature of crypto trading could create a new generation of addicts, the CEO was circumspect on the possibility of compulsive behaviour. 

“There’s definitely that ugly part of the industry. It’s not a black and white situation. But there’s so much wealth to be created if you do it right.”