‘Most of my crypto net worth is in ether’
In 2017, the price of bitcoin rose from $1,000 to almost $20,000. ZebPay, owned by Mahin Gupta, Saurabh Agarwal, Sandeep Goenka, was then India’s largest cryptocurrency exchange. However, when prices of the cryptocurrency crashed in early 2018 and the RBI came out with a ban on crypto-related payments, business came to a standstill. A shift to Australia and Malta, and crypto-to-crypto trading didn’t salvage the business. The owners sold out to Rahul Pagidipati, an Indian origin lawyer in the US. Pagidipati does not fit the standard profile of a crypto professional. He is not a coder, nor a software engineer. Instead, he has spent most of his working life managing his family office and investing in and running health insurance companies. Mint spoke to Pagidipati to understand his journey into the crypto space and where he is headed now. Edited excerpts of an interview:
Can you tell us a little bit about your background?
I was born and raised in the US, but my parents came from India. They are doctors and hence much of my professional life has been spent investing in businesses connected to healthcare. I am a lawyer and also have an MBA degree from Northwestern University. I first came to India to start a business in 1999, during the dot com boom. I launched an insurance claims processing company for US insurers called Anion Healthcare Services. I later sold this company but continued to invest in healthcare-related businesses for my family office - Ayon Capital. This is essentially my own family’s money and we do not raise money from outsiders. I read Satoshi Nakamoto’s whitepaper on bitcoin in 2011 and I was blown away. At the time the price of bitcoin had gone from $1 to $10 and then dropped back to $3. It got me thinking about how to use blockchain for health insurance and I got more interested in cryptocurrencies in general.
When did you acquire ZebPay?
In 2018, ZebPay had shifted base to Australia and Malta from India, after the RBI ban and reoriented itself towards crypto-to-crypto trading rather than rupee-crypto. I acquired a minority stake in the company in that year and gradually got more and more involved in its operations. The company was losing money at the time, around half-a-million US dollars a month. In late 2019 I decided to acquire full control and staked almost my entire net worth for this. My family thought I was crazy! It so happened that just two weeks after my purchase, Binance (an international exchange) announced the acquisition of WazirX, another Indian cryptocurrency exchange. Keeping the company intact was tough but I persuaded most of the middle management to stay on, despite the RBI ban. Three months after my acquisition, the Supreme Court of India quashed the RBI ban and ZebPay took off.
Is there a bubble in bitcoin?
Absolutely not. The market is reasonably efficient when it comes to cryptocurrencies also. I think there are two fundamental reasons why the price has to go up. First, a large section of bitcoin users typically are hodlers (they do not sell easily). This constricts the supply. Second, good money tends to displace less good money. Bitcoin and cryptocurrency in general are technologically better than fiat currencies like the dollar and rupee. They will naturally displace the latter. I’m personally bullish on ethereum though. For nearly two years, I used to buy one ether per day and I will resume this soon. I have most of my crypto net worth in ether actually. Bitcoin is a store of value but ethereum opens up so many possibilities through smart contracts.
What do you charge users of ZebPay?
For a transaction on the exchange platform, we charge an average 0.2%. If you want to move money out of the exchange into a cold wallet, of course transaction fees will apply. This charge is the same for all cryptocurrencies traded on ZebPay. We have a monthly membership fee of 0.0001 bitcoin which is waived as long as you do one trade that month.
How should India regulate cryptocurrency?
There are broadly three types of cryptocurrencies. First, utility tokens like ethereum and BAT should be regulated as digital assets. Kind of like domain names. This should be done by some type of commodities regulator. Second, security tokens (those that represent another asset like a stock or gold) should be regulated as securities by a markets regulator (think SEBI). Finally stable coins (such as cryptos pegged to the dollar) should be regulated by the central bank (think RBI). The central bank should require issuers of stable coins to maintain equivalent fiat currency in reserve. There should of course be regulation, especially for consumer grievances.
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Bitcoin Hoard Fuels One of World’s Biggest Crypto Fortunes
(Bloomberg) – It’s the latest corporate strategy for companies from Tesla Inc. to Square Inc.: shift a portion of cash reserves into cryptocurrencies as digital assets become more mainstream.
Still, few have gone as far as MicroStrategy Inc. Eight months after its first investment, the software firm has a Bitcoin holding worth more than $5 billion.
Shares of MicroStrategy have rocketed almost 600% since mid-July, boosting the fortune of founder Michael Saylor, a billionaire until an accounting scandal in 2000. The chief executive officer is now worth $3 billion, according to the Bloomberg Billionaires Index, joining the ranks of the world’s richest crypto holders, a list that isn’t definitive since some fortunes can’t be identified or verified.
MicroStrategy’s crypto fixation began soon after the pandemic hit when the firm found it had a cash-flow problem: There was just too much of it. After cutting advertising and axing 400 jobs unsuited to home-work, the Tysons Corner, Virginia-based firm was sitting on a cash pile of $550 million with nowhere to put it. Saylor, 56, turned his attention to Bitcoin.
“People still aren’t sure: Are we crazy or are we not crazy?” Saylor said. “The only way to get economic security is to invest in scarce assets that are not going to be debased by the currency expansion. That is the environment that led us to decide we should consider Bitcoin as a treasury reserve asset.”
‘Every Scar’
Not everyone agrees with the strategy.
“Saylor equated Bitcoin to a bank – that’s just ridiculous,” said Marc Lichtenfeld, chief income strategist at the Oxford Club, a financial-research firm that has no stake in MicroStrategy. “When you put your money in a bank, the value of it doesn’t go up or down by 10% a day.”
Saylor has clashed with investors before. In 2000, a shareholder filed a class-action lawsuit against MicroStrategy, alleging it misled investors over the company’s earnings by booking revenue prematurely to inflate profits.
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MicroStrategy agreed to restate its revenue figures and Saylor, once dubbed the wealthiest man in Washington, D.C., with a fortune of $7 billion, lost almost all of it in a matter of weeks after shares fell 95%. He and his fellow executives, without admitting or denying the allegations, paid $11 million to the Securities and Exchange Commission in December 2000, including $1 million in fines.
“It’s made us careful and humble and focused,” Saylor said. “Every scar informs you, and I wouldn’t be who I am without having lived through those experiences.”
Steady Revenue
Saylor has continued to run the analytics software business he founded in 1989, and has overseen annual revenue streams of around $500 million for the last decade, though sales have dipped in recent years.
Bitcoin’s price has soared in recent months, hitting a record above $58,000 last month as big investors pile in and the asset class matures.
Saylor shrugs off concern about Bitcoin’s volatility and said crypto critics are behind the curve. He said he’s also put his own money into the digital asset, amassing a personal holding worth more than $1 billion.
“If you go back 10 years, how many people agreed that Facebook, Google, Apple and Amazon would own the world?” he said. “Who were the last people to embrace this? Senior members of the establishment.”
Raise Debt
Saylor’s appetite to acquire Bitcoin didn’t stop after the company’s first purchase. When the majority of MicroStrategy’s cash reserves were exhausted, Saylor raised a $650 million corporate bond and used it to buy more.
Saylor said he’d rather issue debt against future cash flow now than save up to buy Bitcoin in five years, when he thinks it’ll be pricier.
In February, the company raised another $1.05 billion in a bonds-for-Bitcoin offering, and on March 5 it announced yet more purchases. On Friday, Saylor tweeted that MicroStrategy bought 262 additional Bitcoins for $15 million in cash, bringing the total to about 91,326. The firm’s shares closed down 2.5% to $784 in New York.
Read more: MicroStrategy CEO Will Consider Raising More Debt to Buy Bitcoin
The move has resulted in MicroStrategy becoming a dual-purpose company: part software maker, part Bitcoin investor. While the firm has been transparent about this change in regulatory disclosures, juggling two distinct goals isn’t something that investors are accustomed to.
“If you’re a hedge fund and you want to make that kind of a concentrated bet, you’re entitled to do that,” Lichtenfeld said, but “as a software company to make this kind of a bet is completely irresponsible.”
‘Critical Point’
Saylor said the company has been upfront with investors throughout. When MicroStrategy increased its Bitcoin holding, it held a Dutch auction to give shareholders time to sell their stock.
“Everybody had plenty of time to digest the news and decide whether they’re on or off,” Saylor said.
With all the attention he’s attracted, Saylor wants to do more than just defend a radical investment strategy. He’s become something of a global Bitcoin ambassador in recent months, appearing regularly on crypto podcasts and YouTube shows advocating for digital-asset investments.
“This is a really critical point in human history,” he said. “We’ll build a better world on it once people understand it. We’re still very early. This will be the decade.”
(Updates with additional purchases in 17th paragraph.)
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Bitcoin price under pressure as Binance faces probe, but crypto headed for 16% weekly rise
Bitcoin prices were headed for a sharp weekly rise on Friday, even as the cryptocurrency was facing some negative headlines tied to a major trading platform.
Binance Holdings Ltd., the largest crypto exchange by volume, according to CoinMarketCap.com, was being investigated by the Commodity Futures Trading Commission to determine whether U.S. residents breached securities law by trading derivatives on the exchange, according to a report from Bloomberg News on Friday, citing people familiar.