Cryptocurrency markets are in a slump and people are discouraged. But not Nick Tomaino. The longtime Coinbase employee, who now runs a crypto venture fund backed by big name investors Mark Cuban and Marc Andreesen, thinks things are looking up.
It’s been a year since Tomaino launched the $26 million fund, called 1confirmation, and he says its investments in ten ventures have so far notched year-over-year returns of 40%. While he’s happy with the early performance, Tomaino adds he’s grateful he doesn’t have to face the short-term demands of a hedge fund, and that he can stay focused on the bigger picture of crypto.
In a recent Q&A with Fortune’s The Ledger, Tomaino shared his thoughts on investing strategy and the future value of currencies like Bitcoin and Ethereum. His answers have been edited for length and clarity.
Fortune: You launched 1confirmation last August. What have you learned since then?
Nick Tomaino: One of the things I’ve learned is a lot of people in crypto tend to focus too much on public perception and press. In the last year, I’ve learned that stuff isn’t that important.
There’s different strategies people can adopt, but in the last year a lot of people have tried to go all in on social media and Twitter. I’ve tweeted a lot in the past year but I’ve also tried to tone it down, and focus on being a good partner to the founders I’ve invested in.
What in the world of crypto are you most excited about right now?
A lot of VCs want to see products that use blockchain to find solutions for supply chains or the financial markets.To me the most exciting stuff is still at the infrastructure rather than the application layer. We’re interested in solving problems for the existing crypto community. That’s why we’re focused on four categories of investment:
1) Stable coin companies like MakerDAO and Basis, which are a product the crypto world really wants and needs, especially given some of the problems Tether has. [Stable coins are designed to be a non-volatile
2) Marketplaces in general, including those that help with staking such as Tezos and Vest [staking refers to putting up a balance of tokens in order to help validate transactions on proof-of-stake blockchains].
3) Scalable solutions, especially Bloxroute, which was developed by blockchain experts at Cornell University. What Akamai did for the Internet, Bloxroute wants to do for blockchain by improving throughput.
4) Decentralized exchanges [markets to buy and sell cryptocurrency that don’t rely on a central server or operator].
Where do you see the price of Bitcoin and other cryptocurrencies at the end of the year — and in five years?
I don’t think Bitcoin will cross $10,000 again by the end of this year. But in the next five years, it’s very likely there will be another boom much higher than the one last year and the price will be over $100,000.
I see a world in five or 10 years when Bitcoin is a widely used store of value and is the digital gold, and Ethereum is the most widely used crypto platform and where Ether is the digital oil.
In five years, Bitcoin and Ethereum will lead the way and a lot of the cryptocurrencies you hear a lot about in the top 20 of CoinMarketCap aren’t likely to be around, especially meme-based currencies like Iota and Neo. If the meme is good, it might be sustainable. But if they don’t develop a product they won’t be around.