Warren Buffet used to describe value investing as “buying a $1 bill for 40 cents.” This means that one has to buy stocks at less than their intrinsic value and wait for prices to go up. In other words, it is an investment method foreseeing how much value a company can create. Could this value investing approach be applied in the shaky blockchain industry?
Benjamin Rameau, director of Binance Labs, said value investing is also essential to blockchain projects in an interview with Decenter in Ilsan Oct. 29. His remarks are interpreted as meaning that investors must look at the future of projects from the long-term perspective even when buying cryptocurrencies. He offered advice that “you shouldn’t hold tokens only for 10 minutes unless they are worth possessing for 10 years.”
Binance Labs is an investment arm of Binance Group operating the world’s largest crypto exchange. Since its inception in April, Binance Labs has invested $33 million in 23 projects. The company also plays the role of incubating early-stage projects to be leaders in the blockchain industry. It’s not easy to be the target projects for support though. Rameau said competition to be selected is fierce because successful applicants can not only receive financial support but also absorb Binance’s networks, noting that only eight out of 600 projects were chosen in the latest round of selection.
The selection of successful applicants is made from the perspective of value investing. When judging the future possibilities of projects, Binance Labs gives top priority to whether they are “applicable in real life.” Rameau contends that “projects are valuable only when they can provide users with benefits by applying blockchain technology in real life.” Why “Terra,” a stablecoin project led by TMON founder Shin Hyun-sung, and “Basis,” an algorithm-based stablecoin project, had won investments from Binance Labs was the idea of real-life applications. “In developing countries devoid of financial systems, cryptocurrencies have a higher chance of being used than fiat currencies that need governing bodies,” said Rameau, adding that stablecoins free of price volatility could be real-life alternatives.
Binance Labs has another criterion for judging projects - how a team has been formed. “We also look closely at who are members of the project team. This is because of the need to confirm if there are experienced developers or founders can devote themselves to blockchain,” Rameau said.
Binance Labs then checks startups’ positioning strategies in the market. This is intended to confirm if the project in question is suitable for blockchain technology and similar projects already showed up in the market. Rameau says his company tends to invest if projects, although started small, can be properly applicable where blockchain is necessary.
This value investing approach has an advantage of not being swayed by the current market sentiment. While it’s true the blockchain industry is hitting a snag amid the cryptocurrency crash, Rameau evaluates the current situation as “not bad.” “Rather, the current doom and gloom could offer opportunities to value investors,” he said, adding that they make an investment with the belief that digital assets will be activated more than conventional ones within the next 10 years. Rameau vowed to continue investing in blockchain projects although the Bitcoin price plunges to 1 million won.
Rameau also expressed affection for Korean projects and blockchain technology. “Korea belongs to the world’s top 1% when it comes to cryptocurrencies and blockchain. I am watching with interest as Korean projects are savvy enough to make real-life blockchain applications,” he stated. “My father was a refugee. I became more affectionate toward blockchain technoloy after knowing that it could be used to restore identities to refugees,” said Rameau, noting that blockchain is a technology dedicated to mankind in that it can change society transparently. /firstname.lastname@example.org
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