Philip Blows of AQRU plc On The 5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency
An Interview With Fotis Georgiadis
Beware of market cycles: In stocks and shares, you would expect to see in an average year a peak-to-trough drawdown of about 10% and, every five to eight years, the market would become bearish and drop around 33% on average. This has been consistent for around a hundred years and, as a free market, crypto follows a similar pattern.
Over the past few years, the Cryptocurrency industry has been making headlines nearly every week. Many people have gotten very wealthy investing or leading the cryptocurrency industry. At the same time, many people have lost a lot investing in the industry. In addition, more people have been scrutinizing the ecological impact of crypto mining, as well as its potential facilitation of illegal activity. What is being done and what can be done to address these concerns?
In this interview series called “5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency” we are talking to leaders in the cryptocurrency industry, as well as successful investors, who share insights from their experience about how to successfully invest in Cryptocurrency.
As a part of this series, I had the pleasure of interviewing Philip Blows.
Philip Blows is CEO of AQRU plc, with more than 15 years of leadership experience in the fintech and asset management sectors where he spearheaded the scaling-up of online trading platforms at several leading companies. Philip’s previous experience includes Sales Director at Wealth Wizards, a UK robo-advice platform; Senior Foreign Exchange Adviser at Continental Capital Markets S.A; and Head of Trading at Moneycorp.
Philip holds several internationally recognised financial certifications, including an Investment Management Certificate from the CFA Institute and has been certified as a Blockchain Expert by the Blockchain Council. He is also the author of the personal finance book, The Money Triangle.
Thank you so much for doing this with us! Before we dig in, our readers would like to get to know you a bit. Can you tell us a little about your backstory and how you grew up?
I was born in the UK, just outside London. Since a young age I had a massive interest in finance and, as a 10-year-old, I would even look for finance jobs in the local newspaper and would think of how to apply to them.
I went to university, but I didn’t do anything finance-y. I studied geology, as I had the idea of spending my time at university outside and not having to work in a classroom. But, throughout this time, I continued to be interested in finance.
So, when I left university, I went straight into a career in finance where I helped people find the best exchange rate when moving money around the world. This was around 2005, the markets were good and there was a lot to be done, so I often found myself helping people buy investment properties abroad and ensured they got the most for their money whilst doing it. However, I quickly realised that stocks and shares were something I was also interested in.
As a result, I joined a trading desk and worked there for seven or eight months until I got my lucky break: my boss and my boss’ boss left, so the company started looking for someone to run the business. I was only 21 at the time but, as I was the top salesperson and had proven to be a hard worker, I was given the chance.
After successfully running the business for a few years, I moved to a company called Moneycorp where I became Head of Trading and, after this, I started working in institutional derivatives broking at Continental Capital Markets. I then started working in a FinTech company that was developing the UK’s first online platform to provide automated financial advice. Here is when I saw how many people struggled to manage and invest their money.
This was also around the time when crypto was becoming more popular, but it was this terribly complicated arena that so many people did not understand, and I realised that there was a need for a solution that could help people invest in the crypto markets. This is why I created the crypto yield and investment app AQRU, and the reason why AQRU plc is focused on building, operating and scaling decentralised finance (DeFi) and Web3 start-ups offering services, such as crypto investment, lending and custody, that bridge the worlds of traditional and decentralised finance. The mission is to enable everyone to easily and safely participate in DeFi.
Is there a particular book, film, or podcast that made a significant impact on you? Can you share a story or explain why it resonated with you so much?
I always liked ‘The Lean Startup’, a book in which the author, Eric Ries, uses his journey building his own business to explain how to release a new product to market and then quickly get customer feedback to support innovation and improve the solution. It’s a sort of ‘flywheel’ that goes round and round, with the companies that excel at innovating being those that can spin the flywheel the fastest.
The model in The Lean Startup was central to our strategy for the AQRU app. We initially launched AQRU as an email service through which we would use our expertise to help people generate yields in the crypto market and, every week, we would send our customers an email to update them on our progress.
Once the service was launched, we started spinning the ‘flywheel’: we would regularly approach our customers to better understand their needs, as well as to get their feedback on how we could improve our service and what they would like to see in the AQRU mobile and web app that we were developing at the time.
The AQRU app launched in December 2021, but we’re still ‘spinning the flywheel’ to ensure that we’re delivering a service that truly works for crypto investors. For instance, following the series of high-profile collapses of crypto companies earlier this year, we heard from many investors that they were frustrated with the lack of transparency of many businesses that took excessive risks with their money and, even worse, did not provide them with information on where their assets were being invested, and what the risks were.
So, as part of our flywheel, we’ve focused on showing in our AQRU app that our customers’ crypto is safe. As such, we’ve adopted a marketplace model, where investors can access a number of yield-generating solutions which have either been developed by the AQRU team or by our trusted third parties. We’ve made sure to always provide customers with detailed information on the third-party behind the yield strategy, as well as on how assets are being invested to generate returns.
Is there a particular story that inspired you to pursue your particular career path? We’d love to hear it.
In terms of what got me into finance to begin with, it was reading a book called ‘Market Wizards’ and then the sequel, ‘The New Market Wizards’, a collection of interviews with the most successful investors, hedge fund managers and traders in the world. The first version is quite old, but I find it fascinating how everyone takes different approaches to trying to make money out of the markets.
The book resonated with me because I just love being close to the action. For me, the action is helping people make money and excess returns in the market. AQRU has given me a fantastic opportunity to do this as we’re helping customers every single day to make money out of crypto. That’s why there’s nowhere else I’d rather work.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
This is probably funny in retrospect, but not so much at the time. Very early in my career, I had just started at this new trading business and one of the senior traders on the desk took me out at lunchtime to tell me the way of the world and we had a chat over a couple of pints.
When we went back to the office, I was a little worse for wear, so I tripped on the stairs and made a massive hole in the knee of my new suit. As someone who was on very little money and had just upgraded their suit to the next level, this was quite a knock.
Previously I had this really old, horrible threadbare suit so this slapped me back down a level. This was also a lesson learned: don’t drink at lunchtime and know your limits! Good advice for all of life.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
Everyone needs help to succeed. I’m so fortunate to have an incredibly supportive partner in my wife, Anna. We have two amazing kids, who are a lot of work, so Anna spends her time managing our home life and keeping things running smoothly, which is a huge, huge job. Having that stability behind the scenes is something I’m incredibly grateful for, I couldn’t do it without her.
Are you working on any exciting new projects now? How do you think that will help people?
The most exciting new project we’ve launched recently, and one I’m really proud of, is BlockLender, a company that enables people to borrow against their crypto, and use the loan for whatever they choose. In other words, BlockLender is a way for people to make the most real-world use of their crypto, in a way that is simple and easy to understand — and true to our mission, completely transparent.
Many people who’ve been burnt in crypto have used platforms that have taken massive risks with their crypto — we’ve seen a wave of CeFi collapses over the past six months, many of which can be attributed to poor risk management. BlockLender changes that — we’ve changed the way loans are funded, meaning no unpleasant risks are being taken with our customers’ crypto. And we’re completely transparent about all our innermost workings, too.
Ok super. Thank you for all that. Let’s now shift to the main focus of our interview. The cryptocurrency industry seems extremely dynamic right now. What are the 3 things in particular that most excite you about the industry? If you can, please share a story or example for each.
Promoting finance and inclusion: One thing that we have seen, time and time again, is that the people who have the least money, or the least ability to make money, are the most under-served. There are billions of people who still don’t have a bank account, and traditional banks just aren’t set up to be able to deal with these types of individuals.
In a fully decentralised financial system, there are no barriers to entry. All you need is an internet connection to trade, send money and transfer value around the world. Crypto’s original purpose is to create a financial system for all which is something we need to hold on to.
Removing the middlemen: If you go to a bank and deposit money there, you may earn less than 1% in interest but, if you go to that same bank and then try and borrow money, you could be asked to pay around 5%. This difference is the cost of the middleman.
By using some of the more innovative borrowing, lending and yield generating tools within crypto today, there is a huge compression of those fees. Additionally, the fees that are generated go back to the community that supports the project so it’s a completely different economic model and something that’s really exciting for everyone.
Innovation: There’s been this enormous movement of incredibly talented people from traditional finance and big tech to crypto, with some big executives having even left major investment banks to come into small little crypto start-ups. I think that this growing talent pool that’s entering crypto is what is going to make it succeed, it’s impossible to throw this much brain power at an industry and not have it grow and outperform what is already in place. So, watch this space because the pace of innovation is accelerating.
What are the 3 things that concern you about the industry? Can you explain? What can be done to address those concerns?
Ill-thought out regulation: Regulation is the biggest catalyst for growth in crypto, but it is also one of its biggest threats. When we look at crypto regulation, we know that once there is a firm regulatory infrastructure in place, all the larger institutions will get involved and with them, their customers — it would be incredibly positive for the sector.
But, before we reach this point, there is going to be a big learning curve for regulators as they first need to understand crypto. Many regulatory bodies are incredibly understaffed and underfunded and, as a result, they can’t move at the pace that crypto can which means that some of the regulations that that are coming in are not particularly well-thought and don’t take into account just how different crypto is from traditional finance.
Ill-thought out regulation can affect the sector and stifle innovation, making it one of the biggest threats to the crypto sector as a whole. So, as an industry, we need to develop, and work through, industry bodies to ensure that we can continue engaging with regulators on this.
Misinformation: Everyone who has been on Twitter, TikTok, or almost any other social media platform for that matter, has seen some sort of gasping face in some thumbnail claiming to have the next crypto silver bullet, which is just bonkers.
What’s needed to help protect people from these scams, and what we’re trying to achieve at AQRU, is trusted sources of information where people can hear from those who have their best interests at heart and can help them understand crypto and the risks associated with investing in this space. Without trusted sources, people will be floundering in the dark, lost in the ether of the internet, and unfortunately, they’re going to find nothing but trouble.
Pace of adoption: A problem with big financial institutions, which I discovered previously in my career, is that even when it is blindingly obvious that something is in their best interests, they’re often too big to innovate. For example, I once sold a piece of software to an investment bank and it took them four years to sign it off so, by the time all the admin was done and the project was ready to go, the person who had originally led the initiative had left. So, at the end, a million dollars had been wasted, and the service never even launched.
If we say that blockchain is a great improvement on financial institutions’ current systems, that’s great. But it also means that financial organisations may have to rip out all of their old legacy systems, which is something that takes significant effort and coordination. Some of these big institutions won’t be able to do it, but it’ll be interesting to see if new institutions, which have such a competitive advantage because they’re able to pivot and use new technology, will force some of them to exit the market as they can no longer compete. This whole process is going to take a long time — that’s the nature of the beast.
What are the “myths” that you would like to dispel about cryptocurrency? Can you explain what you mean?
I think one of the myths people talk about is that cryptocurrency is only used by criminals and money launderers. That’s something that you hear in the press a lot, because on the whole, the media remains very sceptical of the sector.
But that’s not what the majority of crypto is used for. Cryptocurrency is about transferring value seamlessly around the world for low cost. This can be done through tokens like Bitcoin, which is often seen as a store of value, but we’re now also seeing things like non-fungible tokens (NFTs) appear.
Everyone knows about these massively overpriced, profile picture NFTs that have got all the press. But this is not all these tokens are about. NFTs’ main use is to serve as a tool to transact and transfer value. NFTs are letting us take something we own in the physical world, break it up into a thousand pieces and sell them to other people, or collateralise them and borrow against that asset more easily than ever before. There are use cases in the real world for crypto that are transformative for everyday life, and that’s something that people need to understand.
How do you think cryptocurrency has the potential to help society in the future?
I’ve touched on this already, but crypto is reducing the barriers to entry to the financial system. Anyone with an internet connection can access blockchain technology and see value from other counter parties around the world. This changes the game for billions of people who are underserved by banks and, as a result, do not have access to basic financial services. By bringing them into a more inclusive financial system, crypto is only going to benefit everyone.
Recently, more people have been scrutinizing the ecological impact of crypto mining. From your perspective, can you explain to our readers why the cryptocurrency industry is creating an environmental challenge?
Cryptocurrency is decentralised which means that there isn’t one party keeping a record of everything. Instead, there are thousands or millions of people, all of whom participate in the security of the network and who mutually agree on who owns what. So, how does everyone agree on the correct ownership of an asset and what does this have to do with the environment?
The largest cryptocurrency, Bitcoin, uses something called ‘proof-of-work’ to do their consensus or agree on who owns what. In this methodology, you have millions of people around the world who are all trying to quickly solve equations to be able to confirm or ‘mint’ the block of transactions that have just occurred. And, for doing that, they are rewarded in Bitcoin.
As more miners try to solve the equations, the blockchain automatically increases the difficulty, but the amount of Bitcoin mined remains constant. As the equations become more difficult, miners invest in more powerful mining rigs to gain a competitive advantage, which use more and more energy. This spiralling arms race of computing power is not great for the environment.
From your perspective what can be done to address or correct these concerns?
A lot of blockchains are now looking at creating consensus models that are less carbon intensive. One of these new models is called ‘proof-of-stake’ which works like a lottery system whereby if you own a token in that blockchain, you have a ticket to the lottery. So, if your ticket is selected, you are the one who gets to confirm the transaction and you get paid a reward.
As ‘proof-of-stake’ doesn’t have all these validators out there constantly trying to solve these equations by using large amounts of processing power, this consensus model is over 99% more energy efficient than ‘proof-of-work’. As a result, we’re now seeing that some blockchains like Ethereum, which is one of the most popular public blockchains, have switched from ‘proof-of-work’ to ‘proof-of-stake’.
The move to ‘proof-of-stake’ is going to be a game changer for investors, especially institutional actors which often need to show that they have considered the environmental, social and governance impacts of their investments. And this is why Ethereum may find that it’s a bigger candidate to be held by institutions than Bitcoin.
Recently, more people have been scrutinizing cryptocurrency’s impact on illegal activity. From your perspective, can you explain to our readers why cryptocurrency, more than fiat currency, is seen as an attractive choice for criminals?
Historically, there was a lack of controls in place, and people who owned Bitcoin could send it to whomever, for whatever. The early days of crypto were tied to a notorious website called ‘Silk Road’. You could buy anything on Silk Road using Bitcoin: drugs, guns, all these sorts of things — it was the Wild West.
From your perspective what can be done to address or correct these concerns?
What we found over time is that as new people entered the market, most of the crypto has been bought with fiat. But, to do so, users must first go through a platform or business that can support with the exchange. These exchanges are required to have anti-money laundering controls in place, so it’s a completely different ballgame to how it was at the start of crypto.
Ok, fantastic. Here is the main question of our interview. What are “The 5 Things You Need To Understand In Order To Successfully Invest In Cryptocurrency?
Beware of market cycles: In stocks and shares, you would expect to see in an average year a peak-to-trough drawdown of about 10% and, every five to eight years, the market would become bearish and drop around 33% on average. This has been consistent for around a hundred years and, as a free market, crypto follows a similar pattern.
Crypto is a highly cyclical market that seems to go in two-and-a-half to three-year waves during which there is a big build up to a peak and then a big crash. This is something that people need to be very aware of because, unlike in traditional finance where the average bear market experiences a decrease of 33%, in crypto, the average crash has been from 80% to 85% which is almost a complete wipe-out of the entire previous move.
For example, in November of last year, we saw Bitcoin reach an all-time high of around $68,000 but, since then, there has been a pullback of around 80%. While it could be argued that this decline shows that the situation might be slightly different from the 80–85% decline in price that we’ve seen before, we can still be fairly confident that, in terms of where we are in the cycle, we’re heading towards the bottom end of the range.
The trend is your friend: There’s another way of looking at this, don’t catch a falling knife. As markets crash, a lot of observers start saying ‘now’ is the time to buy and they’ll say it every time the market drops a little bit further, and further again, until everyone runs out of cash.
People investing in crypto must be disciplined and ask themselves if prices over the last few months were lower than they are today, as that means that we’re in an up-trend which is usually a catalyst for us to begin buying. Now it also works in reverse, if prices were higher before, the market is probably in a down-trend so people should probably start selling and taking off exposure. This is exactly what we’re doing at AQRU through our trend-following system, which we call AQRU Trend, that looks at the price action over the last three months to help our customers jump in at the right time.
Diversification: Crypto is a high-risk asset class. Yes, it has been one of the best performing asset classes for the last 10 years, but it should never be more than 10% to 15% of your overall portfolio. Crypto was not designed to be someone’s entire net worth, it is an alternative asset that complements a diversified portfolio, that should predominantly hold equities, property and, now that we’re seeing the markets change, maybe even bonds.
Be careful: If something sounds too good to be true, it probably is. There’s no way around this, I’m afraid. When someone says that they’re making a hundred percent a month, this is probably a scam. Always do your homework before jumping in, and you’ll be fine.
Keep educating yourself: Crypto is incredibly innovative. If you invested in Bitcoin in 2008, you’ve obviously done exceptionally well but, with new investment protocols and tokens currently available in the market, you’ve probably missed some good return opportunities too. To identify the next rally on time, you must be involved in the space and always on the lookout for opportunities to learn more about it.
What are the most common mistakes you have seen people make when they enter the industry? What can be done to avoid that?
The most common mistakes are literally the opposite of what we just discussed: people jump into something simply because they heard about it on social media. The reality is that by the time a new ‘opportunity’ hits your Twitter feed, it’s probably too late and all you’re doing is buying as the people who got in early are selling to you. In other words, you’ve missed the bell and are now buying and selling at the wrong time.
Do you have a particular type of cryptocurrency that you are excited about? We’d love to hear why.
I’m going to keep this blindingly simple — Ethereum. All the innovation that we’ve seen so far in terms of reducing transaction costs and NFTs, to name a few, is reliant on the Ethereum blockchain. This means that there is an enormous potential for Ethereum to become even more widely used across the crypto and DeFi ecosystems.
Additionally, as I previously mentioned, Ethereum recently transitioned from requiring ‘proof-of-work’ to ‘proof-of-stake’, helping limit the cryptocurrency’s impact on the environment. I suspect that, in the long term, this will only make Ethereum more attractive, particularly to institutional investors who must consider the impact that their portfolio has on the environment.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger.
I like the idea of paying it forward. Everyone is so caught up in their own lives and their own emotions that they can just forget how to treat other people. This is particularly obvious online where you see some people with these online personas that are highly toxic and negative.
I think this is something we need to counterbalance. So, if I could inspire a movement, I would like it to be a paying it forward initiative where people do something good or nice to someone else, either online or in-person, for no additional gain to themselves. Hopefully, this would have a ripple effect which then begets people to be nicer to each other.
We are very blessed that very prominent leaders read this column. Is there a person in the world, or in the US, with whom you would like to have a private breakfast or lunch, and why? He or she might just see this if we tag them.
It would have to be Under Armour’s founder, Kevin Plank. I think he’s a phenomenal businessman and a very inspiring person that has done great things for the business community in Maryland, including consciously deciding to grow Under Armour in this state even though start-ups were not particularly well-represented there.
I also think he has done a great job of building Under Armour’s employee culture. For them the business isn’t a family, it’s a sports team so it’s the job of the leadership team to cultivate an environment which gets elite performance out of the people who work for Under Armour. Kevin Plank once gave this great lecture about employee culture, where he talked about how he was hoping Under Armour would reach a billion dollars’ worth of revenue that year and said that, if they were very close by the end of December, the whole team had agreed to go out and buy shirts until they made it!
Kevin Plank’s methodology and thought patterns around creating a positive working environment where people can do their best work is something that I’ve really tried to do with AQRU and that I would like to get his thoughts on. Also, I really like that he’s a bit of a fist-bashing-on-the-table, big personality which would certainly make breakfast entertaining.
Thank you so much for these excellent stories and insights. We wish you continued success and good health!
Philip Blows of AQRU plc On The 5 Things You Need To Understand In Order To Successfully Invest In… was originally published in Authority Magazine on Medium, where people are continuing the conversation by highlighting and responding to this story.
