Kevin O’Leary Explains Why Institutions Aren’t in Crypto Yet (Exclusive Ft. WonderFi’s Ben Samaroo)
We got the chance to interview the popular investor Kevin O’Leary, also known as Mr. Wonderful, from his performance on Shark Tank, where he’s one of the sharks.
O’Leary talks about some important considerations for our industry, such as portfolio diversification, ESG concerns, institutional involvement (and why it’s not there yet), and some of his most recent investments, such as WonderFi.
We’re also joined by Ben Samaroo, founder at WonderFi, who talks about the future of DeFi and where the industry is headed going forward.
Mr. Wonderful on Crypto: When Facts Change, I Change
O’Leary told us that 6 out of 10 of his most recent investments were in the field of cryptocurrencies. However, he wasn’t always this fond of digital assets. Back in the days, he was rather skeptical of Bitcoin and other cryptocurrencies as well.
When asked about what changed his mind, the prominent investor revealed that he’s pragmatic when it comes to it and his position changed because the market is different.
“When facts change, I change. I’m a pragmatic investor, I allocate capital along a wide range of asset classes.
What kept me out of crypto, although I did own some Ethereum and Bitcoin personally in 2017, was the regulatory environment.”
O’Leary argued that early crypto adopters were ‘going against what regulators were talking about.’ Mr. Wonderful, in his words, is a “heavily regulated investor.” In other words – he can’t afford to be on the other side of compliance.
However, in the last 18 months, according to him, the crypto market saw regulators across the world warm-up. This is what made him feel that the market is available to him as an investor “on a compliance basis.” O’Leary said that he’s not looking to become an investor in cryptocurrencies alone, but also invest in the sector as a whole.
Kevin O’Leary during Bitcoin 2021 Conference. Image by: Cryptopotato
Why Institutional Investors Aren’t in Crypto Yet
Although we saw an influx of big names such as MicroStrategy, Tesla, and a range of institutions allocating small portions of their funds in crypto, Kevin O’Leary argues that institutions, in general, are not there yet.
He said that he is a test case for institutions, and what big investors are looking for is compliance. He argued that none of them are actually scared of volatility – on the contrary, “they want to play.”
“It’s one thing to put a small amount of money to work but when you start talking about a 10% allocation of a large pool of capital, you need to integrate that with your compliance system and your accounting system, and your external reporting system.” as told us by O’Leary.
This is one of the reasons O’Leary recently became a shareholder and ambassador for FTX – a leading cryptocurrency exchange. He reasoned that the CEO of FTX, Sam Bankman-Fried, assured him they offer the compliance needed for him.
O’Leary also touched on the recent hot topic of ESG standards. He believes that more capital will go towards mining facilities that mine sustainably.
“Going forward when I look at new capital in mining, I will only invest in sustainable miners. I have to, I don’t have a choice. It’s not like this is a personal decision, I have to be compliant.”
No Other Crypto Will Replace Bitcoin
The millionaire investor also said that most of them (read: big, institutional investors) are in Bitcoin because they see it as a property and have no plans of selling anytime soon.
“Bitcoin is the property of preferrence to institutions. There’s at least a trillion dollars worth of demand if we can get the sustainability issues and the ethics issues around where it’s mined.”
O’Leary doesn’t think that there’s anything like bitcoin and that no other cryptocurrency will overtake it in terms of market dominance.
The Future of DeFi
During the podcast, we also discussed DeFi at length with the founder of WonderFi, Ben Samaroo. WonderFi is a platform that’s geared towards making the field more accessible – something that Samaroo thinks is where the biggest issue currently is in DeFi.
Samaroo believes that right now, DeFi is sort of restrained to the people within the industry and not as accessible to folks outside of it.
We also discussed a growing issue within the DeFi space – security. Most recently, PolyNetwork was hacked, and the perpetrator made away with $600 million worth of various cryptocurrencies stolen from the platform. Fortunately, he returned the money, but it did leave a sour taste in all DeFi proponents.
Talking about solving this issue, Samaroo said that:
“It really requires collaboration between regulators and industry. Our view really is that DeFi will not be this unregulated space forever.
It’s just like crypto – we’ve been in the space since 2016 and we saw the same sort of messaging – there’s the core community that believes that there should be no regulation and there’s kind of the rest of the world that realizes there’s going to be something that comes – whether it’s a middle ground with what traditional financial regulation looks like or there’s something that’s more akin to traditional regulation.”
Yet, both O’Leary and Samaroo believe that DeFi is here to stay and that it will democratize investing and finance as we know it.
The Shark Tank also spoke about how he diversifies his portfolio, other concerns that institutions may have, where the industry is going to, and much more. Check out the video podcast above, for there is a lot that we talked about!