Brooker Group, a boutique investment bank in Thailand, has begun converting its own assets into cryptocurrencies – in the face of a market that was hot and is now tumbling.
“Eddie” Varit Bulakul, head of international finance and advisory, says the firm intends to invest up to $48 million into cryptocurrency, decentralized apps (dApps), and decentralized-finance tokens. That represents about 50 percent of its total assets.
Varit, who is also now head of the firm’s digital asset division, says the firm began to invest in bitcoin earlier this year. “Our main investment theme is to cover digital finance and DeFi apps,” he told DigFin.
As of end March 2021, the firm held 122.3 bitcoins. As of May 19, a day that saw bitcoin’s price get pummeled, that is valued at $4.7 million – down from the $6.6 million it was worth on March 31.
The firm’s aim is not bitcoin per se but to invest and make business in the broader ecosystem of digital assets.
Brooker Group was founded in 1994 and is listed on the Stock Exchange of Thailand’s secondary bourse, the Market for Alternative Investment. This makes it the first listed company to put its treasury into DeFi and dApps, Varit says.
Although the firm’s partners have looked at crypto since its 2017 boom, the space was too underdeveloped for a licensed and listed institution, with the only theme being to invest in bitcoin or ether as cash replacements. “Now we feel the ecosystem has developed,” Varit said, noting the growing network of blockchain companies and projects.
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The regulatory environment is still uncertain, but the power of network effects is too alluring, and the opportunity to generate returns to great – especially in light of the negligible returns from holding assets in cash or government securities.
Varit reckons the group can generate $200 million to $300 million in quarterly revenue if it reaches its target allocation, particularly as it enters new projects. “If trends continue, that will turn into $2 billion to $3 billion a quarter,” he said, assuming token issuers engage in buybacks and coin burns.
That outlook assumes such tokens do not correlate to bitcoin prices, or if they do, that bitcoin will recover.
As for risks, Varit says the group holds little debt on its books, so it is nimble. “In the short run, there is volatility,” he said, citing last week’s tweets from Elon Musk that sent the entire cryptoverse into a downward spin. “The fundamentals come from the network effect,” meaning the continued demand for crypto as more wealthy people and institutions enter the market.
Brooker will also invest in stablecoins as a form of risk management. “We know how to arbitrage these to generate alpha,” Varit said.
However the move into crypto is not just to make money for the group’s own book. “A lot of companies and management teams have approached us about entering the space,” Varit said. Brooker needs to demonstrate its knowledge of digital assets along with its traditional skills in corporate advisory and business consulting.
The goal is to become the investment bank for companies tokenizing assets, such as real estate – an area where Brooker Group has a lot of experience. Thailand’s regulations do not allow this today, but Brooker expects this to change.
This would also be good for its own portfolio, as a token backed by a real asset has value that goes beyond an expectation that other people will want to buy your holdings.
NFTs – non-fungible tokens – are popular in Thailand but again the regulations for a licensed advisor are not ready. “This is Thailand’s niche, because the NFT market is big here; Thai people love collectibles,” Varit said. “It’s probably a bigger market than real-estate tokens!”
Today the firm is transacting on centralized exchanges such as Binance and Coinbase. It will look to operate on decentralized exchanges once it chooses a digital-asset custodian.
It wants to invest in decentralized projects such as Binance, Uniswap, Enjin and Filecoin.