Analysis

Dubai crypto chief predicts a $200k Bitcoin by 2024

August 4, 2022

“It might get worse,” Vineet Budki, managing partner and CEO at Cypher Capital, told AGBI when asked: Just how bad is the crypto market crash?

Yet, the UAE-based venture capital (VC) firm has been deploying millions in Bitcoin, even as cryptocurrencies suffered their most brutal collapse this year.

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

Overall, the value of the cryptocurrency market is estimated to have slumped by more than $2 trillion since November. The value of Bitcoin – the world’s most valuable cryptocurrency is now down by 70 percent.

“In the short term, it might be bad,” Budki said.

“But we’re looking at the long term. I believe in 2024 you will see a $200,000 Bitcoin. We are deploying for that.

“We don’t care whether it goes to $10,000 or $15,000 or whatever amount [in the meantime].

“As a company, we deployed $25 million in liquid assets when Bitcoin hit $25,000. That was our target entry.

“It went to $17,000 and now it’s back up. People are continuously buying up these dips. Nobody in the world can predict market directions.

“I’m not in the prediction business. I’m in the business of making money when it goes down and making money when it goes up.”

Face, Person, Human — In the money making business: Vineet Budki, managing partner and CEO at Cypher Capital

Budki and his firm are banking on the technology because it has already shown them returns several times over.

Cypher Capital has evolved from the $10 million Phoenix VC fund which invested in more than 100 startups in the blockchain and crypto space.

In March, Cypher Capital announced the launch of a $100 million seed fund that will focus on investments in blockchain, crypto and other digital asset projects.

“This $100 million is our personal money. We don’t collect funds from outside. We are an investment vehicle. This says we are ready to back projects and we have confidence.”

Risky business

Venture funding assets in the crypto space reached more than $21 billion last year, far surpassing the $3.7 billion invested in 2020, according to Crunchbase.

And pure venture funding – pre-seed, seed and all venture rounds – in the cryptocurrency space was already at $3.4 billion, after just the first two months of 2022.

The total amount raised by companies in the crypto industry increased by almost eight times in 2021, totalling a record $34 billion, according to a report by PwC.

“Crypto investment is just like investing in startups,” Budki said when asked about the risks of investing in the volatile, new age sector.

“In ordinary startups people raise money by giving ownership equity for the company. In crypto, they are giving you ownership of the tokens, or ownership of the cryptos that will run the platform.

“I understand startup investment is risky – with a 95 percent failure rate. I’ve been a startup founder for 15 years.

“But I also believe that if your due diligence is correct, and you have certain checks and balances, chances of success are quite high.”

Cypher’s due diligence largely relies on the reputation of the founders they work with, Budki said.

Startups like CasperLabs, which Budki has put money on, include founders who have previously managed multibillion-dollar hedge funds and have been among the founding team of Ethereum.

“At any given time, we have over a 100 pitches on the whiteboard that are under evaluation,” he said.

Although macroeconomic difficulties and blow-ups at major projects have created a “crypto winter,” venture capitalists continue to pour money into digital currencies and blockchain startups at a pace that’s set to outstrip last year’s record.

In the first half of the year, VC firms bet $17.5 billion on the sector, according to data from PitchBook. That puts investment on course to top the $26.9 billion raised last year.

Pitching the future

Cypher is currently scouting for projects in the DeFi (decentralised finance), GameFi (play-to-earn games) and metaverse space, and innovative blockchain projects in general, Budki said.

“It’s not about now,” Budki said.

“It’s about 2030. We are too early in the space. It’s like the internet 15 to 20 years back, when it just started.

“The ones which are very popular are layer solutions. Layers 0 and 1 are definitely interesting to invest in and we predominantly look at those.”

Although based in the UAE, the majority of the pitches Cypher receives come from the US, Europe, India and China, Budki said – a move that says to startups that capital exists in the region, and people are ready to invest in projects.

Even as regulators elsewhere flag concerns over the technology, the UAE is fast becoming a hub for the virtual asset sector.

The UAE has been ranked fourth in a list of the world’s most crypto-ready countries, published by forex education platform Forex Suggest.

Earlier this year, Dubai granted a virtual asset licence to Binance, the world’s largest cryptocurrency exchange, to conduct operations in the region. The news came amid rumours that CEO and founder Changpeng “CZ” Zhao has moved to Dubai.

“Dubai is open to getting people [like CZ] and that definitely will help build up Dubai as a crypto hub,” Budki said.

Last month, Hong Kong-based cryptocurrency exchange Huobi Group also announced plans to set up operations in Dubai, describing the city as a global hub for the virtual asset industry.

“Because the policymaking here is very fluid in nature,” Budki said. “That’s what has made Dubai different from everywhere else.”

However, the city is not without its challenges for new entrants. There is still work to do before it evolves into a tech hub on a par with the likes of Silicon Valley, Budki said.

“Dubai right now is something like New York, where the money exists to set up something,” he said.

“To converge New York and make it into a San Francisco, you have to be able to see to it that the cost of running that startup out of this place, and visa issues, and all the living arrangements around it are really done well.

“That enables entrepreneurs to focus on building the project and not managing their costs.”