The new VALR10 bundle is designed for investors seeking crypto exposure but who are unsure which specific assets to purchase. From Moneyweb.
You can also listen to this podcast on iono.fm here.
The crypto market is down more than 20% in the last month, part of a broad sell-off in global markets. That’s the consequence of the US government shutdown, crypto profit-taking, and markets sensing further cuts in interest rates.
A lot of weak holders of Bitcoin, Ethereum and other cryptocurrencies have been shaken out of the market. So, is now a good time to buy? Just this week, South Africa’s largest crypto exchange by volume, VALR, announced the launch of its own crypto bundles.
These are the crypto equivalent of a unit trust – where rather than buy one crypto, you get exposure to many. These bundles are managed and then rebalanced each month.
In this podcast, Blake Player, VALR’s chief commercial officer, explains that the bundles are being pitched at those who want to have some exposure to crypto but don’t know where to start.
A desire for some exposure
“This is not the first time that the market is seeing a product like this. It is the first time from us, though, and we have a large number of clients that have trouble in deciding exactly which digital assets or crypto assets they’d like to buy. And a lot of the desire is just to get exposure to the overall market performance within this asset class,” says Player.
“Previously, our customers have been able to assemble these products effectively themselves, purchase these assets and rebalance them themselves. But this is a way to make that even easier where we have an automatically rebalancing portfolio of assets that they can get exposure to in a single unit.
“So our desire here is to not only just do this specific top 10 bundle, but also to create a platform and the capability for us to assemble a whole range of interesting bundles ranging from not only a top 10 or market cap weighting, but also completely different strategies that might include non-crypto specific assets, [such as] stocks or gold.”
Though the VALR10 bundle is spread across the top 10 cryptos by market cap, no one crypto can exceed a 40% weighting in the bundle.
“We do this to prevent any single asset from having an outsized influence on the overall portfolio and to actually result in some diversification away from the large asset,” says Player.
“So we do implement some caps. There [are] also certain assets that we may not include. For example, we don’t add the stablecoins, even though they have a very large market cap. They’re not added to the portfolio.”
Read: VALR becomes SA’s first licensed crypto derivatives issuer
What about fees?
“We take an annual management fee of 2% and all these costs are on the fact sheet, which you can download on the [VALR] website,” says Player.
“And then your cost to access the fund is the same as any other asset you would trade on VALR.”
Stablecoin savings in Africa
VALR also announced a partnership with payments company Mukuru to promote stablecoin savings in Africa. Mukuru has about 17 million customers, many of them in countries with weak domestic currencies.
US dollar stablecoin transaction volumes now exceed $100 billion a year in Africa.
This came up as a concern at the Africa Stablecoin Summit in Johannesburg last week, where regulators expressed fears over the potential for the ‘dollarisation’ of their economies via stablecoins as Africans ditch weak local currencies for stronger ones like the USD.
“A lot of work has gone into making this possible,” says Player.
“It’s about how do we give access to a customer segment that is quite difficult to serve profitably for many institutions, access to higher quality financial products and a means to save in a way that supports their cost base. Many of these clients of Mukuru are sending dollars back to their families every month.
“Let’s take the example of a Zimbabwean family who might have somebody working in South Africa. That is likely to be a client of Mukuru who is sending some portion of their income back to home. But at home, they need dollars to spend. And for that person, it’s very difficult for them to get access to a US dollar-related savings product.
“But by using much cheaper technology and more efficient technology, we’re able to, through WhatsApp interface, literally, without any mobile apps other than WhatsApp, you can purchase USDC through our partnership with Mukuru in your Mukuru accounts. And you can start to save in US dollars that you might then need to send at the end of the month or the end of the year back to your family at home.
“And we’re able to do this at a fraction of [going] to a money changer or a traditional bank.”
Listen/read:
Are the banks warming to crypto?
Are SA banks about to enter the crypto market?
US dollar stablecoins are not actual USDs, explains Player, but a crypto version of USD.
The cost of transfers using this system are 1.2%, compared to the average of just below 7% according to World Bank studies.
VALR is morphing into a crypto-leaning financial services group, launching several new products over the last year, including xStocks (crypto versions of stocks like Apple and Tesla), a USD-yielding investment product, and now crypto bundles and a tie-up with Mukuru for those looking to send money quickly and at low cost.
