VanEck's Portfolio Manager Pranav Kanade, the driving force behind the Digital Assets Alpha Strategy, recognizes both significant potential and challenges in investing in Bitcoin.

At the Benzinga Future of Digital Assets event on Tuesday, Kanade drew a comparison between VanEck (a firm managing approximately $80 billion in traditional assets) and BlackRock, highlighting that the key distinction is VanEck's status as a fully family-owned enterprise.

Talking about the benefits of investing in Bitcoin (CRYPTO: BTC), he said, “Positives are you can get really asymmetric return profiles with these assets given that they're kind of Series A, Series B assets with liquidity.”

However, he also pointed out the drawback, which is volatility. “So anyone I talked to about liquid crypto, their immediate reaction as well, like this thing goes up and down 40% in a good month or something crazy. And the volatility either forces people to think about the space very short term… or just stay away from it altogether and then try to trade these things.”

Bitcoin Outlook 2024: "I think the spot ETFs are positive because they just create potentially incremental demand. On the flip side, you have a Bitcoin halving coming up in April," Kanade said. "That's a reduction in supply. So, there's an interesting line up there."

He also mentioned that adopting Bitcoin has become easier, with numerous applications simplifying the process of getting on-chain in just a couple of clicks. “I'm cautiously optimistic that you'll see some adoption this time around.”

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Approach By VanEck: Kanade explains that as traditional investors, VanEck approaches cryptocurrency investments from a business standpoint. They assess if these crypto ventures are sustainable businesses with defensible fees that benefit the tokens, thereby creating a mechanism for the return of capital that can be valued.

The next step involves analyzing various projects and tokens in the space, focusing on relative value, to identify where the most asymmetric risk-reward opportunities lie.

Bitcoin Vs. ETH: Kanade notes that while valuing Bitcoin is challenging, Ethereum (CRYPTO: ETH) can be valued by examining the developers creating applications on its platform. He explains that when users engage with these applications, they pay fees that benefit ETH token holders through mechanisms like token burns, and also accrue to stakers as tips or even as Maximal Extractable Value (MEV).

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Photo: Pratya Jankong