HONG KONG SAR – Media OutReach – June 21, 2022 – Babel Finance, a crypto financial services provider that provides digital asset lending, recently raised $80 million in a Series B funding round. L investment increased the company’s value to $2 billion. Leading venture capital firms such as Circle Ventures, 10T Holdings, Jenerations Capital, BAI Capital and Bertelsmann, and Dragonfly Capital led the fundraising.
Babel Finance’s $80 million round is not the first. Last year, it secured $40 million from Tiger Global Management, Sequoia Capital China, Zoo Capital and other major institutional investors.
Del Wang, the company’s CEO, commented on the move, saying the crypto industry is “full of opportunities and hidden dangers.” The funding round also supports crypto’s long-term path, and that it has the potential to replace gold and its position in the current financial system, he believes.
For decades gold investors have touted the precious yellow metal as the ideal “store of value”, protecting their investments from the destructive effects of inflation. Next is Bitcoin. Some cryptocurrency proponents have recently claimed that crypto can track price growth better than gold. They say it will be even more independent of the dollar and other traditional financial assets because it exists entirely outside of the current financial system.
Traditionally, investors concerned about inflation and the loss of value of buying fiat currencies have turned to gold. Due to its scarcity and durability, the argument is that gold is a greater store of value than paper money, which has infinite supply and is backed by the government.
However, is gold stable and a good store of value? In 2021, the limitations of gold as an inflation hedge were even more evident. Gold was down as consumer prices rose at their fastest pace since 2008. On the other hand, Bitcoin and many other crypto assets saw growth in value, despite recent volatility.
Del Wang believes that Bitcoin and crypto assets will become increasingly mainstream for the financial asset industry and investors in general, citing that several financial institutions have already transitioned from traditional commercial banking into the crypto arena. Accordingly, Bitcoin, crypto assets and gold should have an increasing correlation.
Del Wang suggests that as crypto assets and bitcoin become more mainstream investments, investors would start to view the two assets identically. In defense of gold, some argue that volatility is crypto’s weakness. Gold and other precious metals are more conventional stores of value. In theory, they are not as volatile as crypto and therefore unlikely to trade near zero in value.
Del Wang and his crypto team at Babel Finance looked at an indicator of an asset’s effectiveness as a “store of value”: the Sortino ratio. It is a measure that modifies returns to account for volatility. According to a five-year chart on the casebitcoin.com website, Bitcoin has consistently outperformed gold’s Sortino ratio despite its reputation for increased volatility. Gold is therefore very volatile and Bitcoin’s rapid gains made the increased risk attractive.
Evidence indicates that it is possible that crypto assets and Bitcoin will replace gold and its position in the current financial system. Even during extremely volatile times, Bitcoin shines as a store of value over a medium to long-term horizon. Even more than gold.
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