Crypto And NFTs: A Sceptic And A Believer Debate The Pros And Cons
Hedge fund manager Devan Linus Rajadurai and NFT proponent Hugh Koh of Pestle and Mortar Clothing share their differing perspectives on cryptocurrency and NFTs
Non-fungible tokens (NFTs) and cryptocurrency have been topics of contention for a while now, with different camps of opinion forming. Some people believe strongly in their ability to revolutionise industries—from traditional finance to gaming—while others are more cautious of jumping on the bandwagon due to the nascency of both concepts and their potential impacts on the environment.
An NFT is a type of digital asset that is created to represent ownership of unique virtual items. They are typically purchased at an NFT marketplace using cryptocurrency, like Ethereum, which is a digital currency that is secured by cryptography, making it incredibly difficult to counterfeit or double-spend. Both NFTs and cryptocurrencies are enabled by blockchain technology, a decentralised digital ledger of all transactions across a peer-to-peer network.
Recently, we decided to organise a friendly debate between two individuals with different opinions on NFTs and crypto: Hugh Koh is the co-founder and chief vision officer of Pestle & Mortar Clothing, a streetwear label that recently collaborated with Tiger Beer to create an NFT collection to celebrate the Year of the Tiger, and Gen.T honouree and crypto sceptic Devan Linus Rajadurai, who helms the hedge fund MTC Asset Management.
Read on to see how the conversation went.
Read more: 9 Ways to Flex Your NFTs
What are your personal histories with cryptocurrencies and NFTs?
Hugh Koh (HK): I’m new to the space. I had bought some Bitcoin in early 2021, but it was not a substantial amount. I wanted to be part of my circle of friends who were dabbling in cryptocurrency at the time.
Furthermore, I was introduced to NFTs by a friend, who encouraged me to launch an NFT project as luxury brands like Louis Vuitton and Burberry were entering the space. I was sucked into the NFT craze when a community-based streetwear brand I followed called The Hundreds released their NFT project. I remember tuning in for the launch at midnight [Malaysia time] and the [feeling of] FOMO [being so] overwhelming as I saw their NFTs being sold. That night, I felt the urge of wanting to be part of something bigger—and that set me down the path to learning more about NFTs.
Devan Linus Rajadurai (DL): As a hedge fund manager, I get a lot of questions asking me about cryptocurrency and NFTs, so I have to be familiar with them. I first heard about cryptocurrencies back in 2010, predating the hedge fund I co-founded. I knew of a friend who was building a computer to mine Bitcoin. He boasted that cryptocurrency offered high returns that outweighed those provided by conventional stocks. The funny thing is my friend stopped mining in 2012 because of the high electricity bills he incurred. I joked with him that he would have been a millionaire today if he had continued mining Bitcoin.
Jokes aside, as an investor, I am cautious about cryptocurrencies because, during the height of the craze, many companies created their own coins as a quick way to raise money. I find NFTs more fascinating as they represent something of value that you can collect. That being said, I personally have not invested in either.
Do you think cryptocurrencies and NFTs are investments worth considering?
DL: We need to differentiate between what is an investment and something that is purely bought for entertainment purposes. The problem with cryptocurrencies and NFTs is how easily people can buy them via an app, compared to, buying a rare piece of art, a Rolex watch or an expensive sports car. For some people, these are worthwhile investments, as they attach a value of happiness to them. So, I would advise my clients to do their own research first before investing in cryptocurrencies or NFTs.
HK: I can only comment on the perspective of NFTs, but I see a lot of people taking an interest in NFT projects associated with brands they like. Similarly, I often tell my friends who are thinking of getting into NFTs to do their research and find out who is behind a project before buying. There is a lot of speculation in this space, and you hear about instant millionaires in a week. But many people lose money to NFT scams, so do your homework before investing.
NFTs have been popularised over the past few years, but do they hold any real value or is there a bubble forming?
DL: Compared to cryptocurrencies, I consider NFTs to offer some value as something that you can show off to your friends. They are similar to the items you can get in games like Counter-Strike, where you can buy skins for weapons and show how cool it is to friends playing the same game on the other side of the world.
Looking at it from a purely financial point of view, you have to ask yourself, what is the actual demand for NFTs? It is something that we do not know yet. Recently, there was an article indicating that the value of some NFTs being artificially inflated by a practice known as wash trading, where users buy and sell their own NFTs.
HL: I agree to some extent that social media has portrayed that anyone can start an NFT project and sell it to be a millionaire. Just because there is a lot of demand for NFT at the moment, it has motivated people to create their own NFT projects. But many are just cash grabs and the majority of them won't sell. If you genuinely want to create a good NFT project, it takes a lot of hard work and sleepless nights.
Do you think the time is right for people to start investing in cryptocurrencies and NFTs?
DL: I wouldn't put all of my money into either one just yet. There is still much work to do before NFTs and cryptocurrencies can be considered safe assets for investors. Traditional assets like stocks are governed by regulations that protect investors from being scammed. They need to make the rules of the game concrete and stop the scamming, and only then will it be a fair game for everyone.
HK: I think there is an argument for the decentralised nature of NFTs and cryptocurrencies. Running on the blockchain means that you don’t have to create a level playing field through a system. It doesn’t matter where you are, so long as you have access to the internet, you can access the same tools as people in developed nations.
Being a creative at heart, I see the value in NFTs as they help increase the freedom and independence afforded to creators. When we speak about royalties, you need to be represented by a gallery in the traditional art world if you want exposure. But thanks to technology and the blockchain, artists can be their own marketers and have their work noticed more easily.