Cryptocurrency is awkwardly strung between mainstream acceptance and threats of regulatory killjoys for the digital currency market. How can startups and investors best play the crypto-token field as it continues shifting and shaking?

“I am part idealist, but I’m also part capitalist and realist, where I understand the reality of the situation where I am right now,” said Mike Bucella (pictured), global head of strategic partnerships and business development at BlockTower Capital.

Beside the astounding capital-raising strength of legitimate initial coin offerings and other booms, there are plenty of busts, according to Bucella. “There is a lot of inflated valuation in the market, there are a lot of players in the space who shouldn’t necessarily be operating in this particular area but see the allure of capital markets … .” 

Bucella spoke with John Furrier (@furrier), host of theCUBE, SiliconANGLE Media’s mobile livestreaming studio, during the recent Polycon18 event in the Bahamas. They discussed the shiniest and slimiest bets in cryptocurrency today.

Don’t fear the regulator

Crypto investors must recognize the risk and volatility of these emerging currencies, Bucella pointed out. They ought to view them as an allocation of risk capital, one of the most unstable and cyclical asset classes in their whole portfolio. Even within that allocation, the types of exposure should be diverse, he added. For instance, there is passive exposure, a small piece of the portfolio with the tokens likely to generate the most value over time. Then there are early-stage, speculative products, plus private investments in exchanges, mining operations and the like.

“You kind of want to diversify your exposures amongst those levels of the ecosystem,” Bucella said.

As for scams and other muck, investors will have to do their due diligence, since regulators have only just set foot on the crime scene. Luckily, the Securities and Exchange Commission and others seem earnest about cutting out sketchy operators without hindering the honest, according to Bucella.

“They’re looking to stop a lot of the bad actors in this space, but they’re looking to be helpful for the broader community,” he said.

Essentially, regulators want to know why investors or startups would go the crypto route instead of a more traditional one. A look at startups that fund projects with ICOs provides a good answer. They can raise a ton of cryptocurrency quickly and evade the two or three dozen venture capitalist meetings the old method entails, Bucella explained.

“Their time is much better spent coding and developing their project,” he concluded.

Here’s the complete video interview below, and there’s much more of SiliconANGLE’s and theCUBE’s coverage of Polycon18.

Photo: SiliconANGLE