Sebastien Davies’ Thoughts on the Future of Digital Assets

Small Business Canada

Sebastien Davies, Principal of Aquanow

Sebastien serves as a Principal of Aquanow where he focuses on research and investment management for the company. He comes to Aquanow from CIBC Capital Markets where he held several key roles in institutional equities and derivatives sales. Sebastien has also served as a research analyst at Rayne Capital Management Inc. and a financial analyst with Trilogy Energy Corporation. In his spare time, you can find Sebastien exercising on the Vancouver sea wall, contributing to a DAO or researching the next NFT project. He is also the author of Aquanow’s Digital Dives, a weekly e-newsletter on trends and topics shaping the digital economy.

How will you describe your career as a principal at Aquanow, which is a leading digital asset infrastructure company based in Vancouver?

As Principal of Aquanow, I focus on research, investment management, and growth initiatives. For most of my career, I’ve been a “finance guy” but now my work is more focused on communications. Part of being at a startup is that there aren’t typically siloed departments, so if something needs to get done, then the team in place must complete the necessary tasks. Often, this requires upskilling in a hurry. It’s a fluid situation, which can be somewhat stressful, but the rewards outweigh the challenges. The digital asset market is evolving at a break-neck pace, so as we adapt to the ever-changing landscape, I assume there will be many more opportunities to learn.

How can the common perception of risk as something to be avoided the need to be reframed as the fee paid for earning a return?

Investors would never balk at a big gain, but they should be mindful that such a move could be expected on the downside too because the risk is often proportional to return. Gains from investment can be viewed as the compensation received for accepting exposure to hazards. Risk tends to carry negative connotations, but it isn’t necessarily something to shy away from. In fact, many of humanity’s greatest achievements have been attained by understanding and overcoming risk. Pushing boundaries can create new high watermarks against which we might measure future successes.

With the increase in the use of digital assets, how do you think investors should manage risk with these assets?

Investors must first understand that an asset’s volatility doesn’t necessitate its higher propensity for causing losses. Selling an asset for less than it was purchased can permanently impair one’s capital, but that is often a decision motivated by fear or a forced outcome due to leverage.

Extensive research can reinforce a deep understanding of the assets we own, which helps us avoid making investments whose prospects are unlikely to pan out and provides the conviction to hold steady through turbulent markets. It’s also important to size positions appropriately, which can alleviate the anxiety of watching a portfolio’s value decline.

Diversification is a powerful risk management tool as well. During periods of extreme market stress, risky assets tend to move in unison, but cryptocurrencies have demonstrated some idiosyncrasies during the recent market downturns. During these uncertain economic times, investing in digital assets and rebalancing frequently may be a strategy to enhance returns.

What does your experience in traditional finance say about this viewpoint on risk management?

Traditional institutions are deeply involved with policymakers and risk management supersedes all. As a result, the incumbents take slow and deliberate actions. Blockchain technology can reduce costs and unlock new sources of revenue, so financial organizations are evaluating how to get involved. However, the lack of regulations combined with unfamiliarity with digital assets, in general, hold them back from making large investments in the space.

This creates an opportunity for FinTechs like Aquanow who empathize with the constraints of these large firms. We can reduce the risk of getting involved by making investments in infrastructure that can tie in to the incumbent systems and by helping educate executives. 

What specific advice you would like to give to financial institutions regarding the use of digital assets?  

Despite the recent volatility, digital assets continue to offer promise. Regulators are working to provide clarifying legislation and the industry is educating them about the nuances of this novel space. Risk remains, but that is also a source of opportunity. By partnering with a firm like Aquanow, institutions can gain exposure to the digital economy in a measured way that is customized to meet their unique needs.

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