While no data exists on the subject, anecdotal evidence suggests that the asset balance of many cryptocurrency investors leans heavily towards cryptocurrencies. Commodities, real estate, and equities like stocks can be a tough sell to someone who’s experienced the extreme highs and incredible gains that are not just possible in “crypto” right now, but almost commonplace. In these early phases of the crypto market it takes a special type of person, one who’s generally more risk-tolerant, to invest in crypto in the first place. While it’s likely there are some who have a conservative percentage of their overall investment portfolio, say 5% - 10% in crypto, it’s very common for someone to have all or nearly all their investments in crypto-assets.
I am a typical example of this kind of investor. I’m a 39-year-old single father and I have less than $1000 in a Roth IRA, own no real-estate, and sold the stocks and ETFs I owned to buy crypto. Not only do I currently have 99% of my portfolio in cryptocurrency, but at this moment 80% of that is in two coins. For me and most of the crypto enthusiasts I know, so far this aggressive strategy has paid off. However, this is simply not sustainable, and I realize that at some point I’ll have to diversify or mitigate risk. In twelve years my daughter will need a car, in fourteen years college will need to be paid for, and at some point I might want to retire. A large portion of my portfolio will need to move from what’s considered high-risk or high-volatility to something safer, ideally something that would allow me to earn interest on my assets. While a growing number of people may have been made millionaires many times over from bitcoin, ethereum, and a long list of others, there have to be an equal number of people who have lost money in their investment – many in the recent crash from the euphoric bitcoin highs of late 2017 and early 2018. We can hope for a Lambo, but should plan for a nice, dependable Toyota just in case.
To that end, FIC Network, dubbed “Bonds on the Blockchain,” brings a unique “best of both worlds” kind of opportunity to crypto investors. As stated in the whitepaper:
“FIC Network is an end-to-end decentralized fixed income securities network that enables the listing, exchange and securitization of fixed-income financial instruments.”
In other words, it allows you to trade tokenized loans. With FIC, cryptocurrency investors will be able to diversify their portfolios with far more flexible, low-risk financial instruments. In a market full of look-alike coins and useless projects, the FIC Network and token are one of a kind in an industry that is undoubtedly moving towards tokenization.
I first read about FIC in early March when CrushCrypto reviewed it and gave their highest rating of Good/Good for short/long-term investment. A week later Astronaut Capital, who does rigorous analysis, announced they were taking exposure to FIC in their ICO investment fund and rated it 8/10, an excellent rating. After doing a deep-dive, here’s how I see FIC bringing something unique to crypto and offering people like myself a way to diversify.
Hope for a Lambo
To determine FIC token’s potential short-term return on investment, we’ll look at the metrics and project quality. The ICO has a low hardcap of $16 million, so there’s a lot of room to grow. To break into crypto’s top-200 right now it takes a market cap of $76.7 million, or 4.8x initial FIC cap (assuming the hardcap is met). 200.3 million, or 12.5x FIC hardcap, puts a coin in the top-100. There are no cryptocurrencies to compare FIC to - it’s the first of its kind - but the global bond market is valued at $100 trillion, with a daily volume of around $700 billion. FIC will be the first to tokenize credit instruments, and in the foreseeable future this is a space they’ll have all to themselves. Considering the massive size of the bond market, a top-100 market capitalization by mainnet launch in June seems likely to me.
The number of bonus tokens is reasonable and in-line with the normal ICO. If you total private pre-sale and public pre-sale bonus tokens they account for about 23% of supply. The team has a vast amount of experience in the industry and pedigrees from firms like Porter Novelli Latvia, where CEO Arturs Ivanovs represented the European Investment Fund and Mercedes-Benz among others, and Fisher Row Capital, which COO Alvar Soosar co-founded and where he managed a $7.8 billion portfolio of fixed-income securities. They’re experienced and outstanding, enough so that they secured seed funding from three institutional investment firms prior to beginning development. Development is also way ahead of schedule, with the mainnet launching in June instead of Q4 2018 as set out in the roadmap.
FIC has all the ingredients one would expect from a project that does multiple-times return on ICO investment, so for the aspiring Lambo owners out there, it satisfies.
Plan for a nice, dependable Toyota just in case
FIC token’s potential long-term upside comes first from simply holding it. Similar to BNB and KCS, FIC tokens have a fixed supply, and a percentage of them are burned every time they’re used to trade financial instruments. As more of the supply is burned, assuming demand stays the same or increases, the value of the token increases. Exchange tokens like BNB have held value and increased in value more dependably than almost any other category. BNB, the most successful, competes for a share of daily cryptocurrency trade volume that’s around $23 billion at present. FIC, on the other hand, will be competing for a piece of a global bonds market that does about $700 billion in daily volume. If FIC Network is successful and gradually tokenizes more and more of the enormous global bonds industry, the sky’s the limit.
From a utility perspective, FIC token’s long-term upside comes from the integral role it plays on the FIC platform, where it’s required to list, buy and sell all fixed-income financial instruments. You can essentially move assets from cryptocurrency to fixed-income security via the FIC token and platform, without having to go crypto to fiat then fiat to security. It gives someone like me the ability, as I get older and closer to retirement, to seamlessly transition my portfolio from high-volatility crypto to fixed-income securities that are far less volatile. FIC also brings to market a proprietary new instrument called an Expected Cash Flow, or ECF. An ECF essentially gives investors the ability to slice up the cash flow of fixed-income assets virtually any way they want, and to buy and sell shares of tokenized loans with varying repayments and degrees of risk instead of having to trade whole loans. Not only can the FIC Network and token be used to enter an entirely different asset class, it goes even further and allows literally any degree of risk mitigation one could want within that class. It’s a revolutionary concept and a completely new way for people and institutions to diversify.
Conclusion
The FIC testnet and alpha version of the dApp, called “Factury,” are already up and running. I downloaded it and spent a few hours creating accounts, buying and selling loans, and building a portfolio. I found Factury to be clean, simple and surprisingly easy to use, even without a guide. FIC will first focus on institutional adoption, as that’s where the bulk of trade volume is, but it’s a platform that just about anybody can use and will be available for individual investors as well.
I believe Institutional adoption of FIC will happen quickly because FIC offers a significant improvement over the traditional market; the current fixed-income market is plagued by slow transaction settlements that take days, if not weeks. With the implementation of blockchain, FIC makes that happen in seconds. Transaction costs are greatly reduced, transactions are immutable and easy to audit, and for the first time ever loan portfolios can be securitized and traded. FIC has first-mover advantage in the largest financial market on earth, an outstanding, experienced team, great tech and dApp interface, and generally seems extremely likely to succeed. Hopefully someday, when FIC market cap is many, many times higher than where I bought at ICO, I’ll actually be able to let some tokens go and properly diversify too. We’ll see.