- The former co-president of Morgan Stanley, Zoe Cruz, calls cryptocurrencies a potential “moonshot” opportunity.
- Cruz highlighted the advantages of XRP over the traditional financial system and SWIFT for cross-border payments.
During a webinar at the Kenan Institute of Private Enterprise, Zoe Cruz, former co-chair of Morgan Stanley and strategic advisor to Ripple, discussed the implications of including cryptocurrencies in a traditional investment portfolio. She discussed the advantages of a traditional portfolio over cryptocurrencies, the ideal allocation strategy and the differences between cryptocurrencies as an asset class and venture capital.
At the beginning of the interviews Cruz also commented on the current monetary policy situation compared to the global economic crisis in 2008 and explained that it is currently not clear what phase of the crisis we are in. As she discussed, we could be analogous to the crisis at that time in 2005, 2006 or 2007.
In light of this, Cruz noted that while stocks and the traditional financial market remain in the green zone, cryptocurrencies can be a means to diversify one’s portfolio. In this context, she also referred to crypto-currencies as a potential “moon shot” opportunity, similar to the boom in Internet stocks around the 2000s:
I look at cryptocurrencies not like looking at correlations […] So I look at those crypto investments and I believe in diversified investments as moonshot opportunities where your investment can go to zero or you can make a 100x if that world continues to grow. […] It is rational to have 5-10% […] in that space, but not just Bitcoin, not just XRP, but the top contenders.
In line with this, Cruz further explored that it is reasonable to invest not only in one cryptocurrency, as it is not certain at this time which cryptocurrency will ultimately prevail, similar to Google versus Netscape during the Internet stock market boom:
[…] diversify within that asset class of the top five to ten cryptocurrencies and to me saying ‘I’m only going to invest in Bitcoin’ […] is equivalent to the early 2000’s to say you only gonna invest in one internet stock. […] There will be winners and losers, but I wouldn’t wanna have Bitcoin while it ends up being the Netscape of your investment opportunity.
Regarding Ripple and XRP, Cruz highlighted the advantages of the cryptocurrency over the traditional financial system, SWIFT, for cross-border payments. Ripple’s strategic advisor described that the current system works well for large banks, but not for small businesses. In this area, Ripple’s XRP offers a superior solution, Cruz said:
XRP is the cross border payment system. […] Cross border systems currently practice through corresponding banks, it works fine for the SWIFT system [and]if you are Morgan Stanley sending a billion Dollars to Goldman Sachs or Citi Group. If you are a small basket weaver in Nigeria, not so good. So the cross border payment system with XRP was designed for rapidly, instantaneously transactions for a very high volume, low value business […] its minus is a lot of concentrated holdings in Ripple, the place where I advise, where 50% that were minted are on the balance sheet.
In general, with regard to cryptocurrencies, Cruz continued to emphasize that for her they are a type of VC investment where a moonshot in 2 out of 10 investments can be considered a successful outcome. In this regard, she also mentioned Ethereum as a promising project:
[youtube https://www.youtube.com/watch?v=bp25ZkbMwlU?start=597&feature=oembed&w=796&h=448]Ethereum is a very successful currency […] So I would look at these currencies as a VC investment, a surrogate for a venture capital investment, without the fees, without the intermediaries and as you know from VC investments, you are very very good if you have two moonshots and eight of them go to nothing.