USA Verdict

Is EGW Capital On Verge Of A Solid Rebound?

EGW Capital (EGW), the blockchain investment bank, had a dismal token performance in 2020. The company lost nearly a billion dollars in valuation and severely underperformed compared to Bitcoin and Ethereum, which gained 167% and 300%, respectively. EGW Capital, on the other hand, lost 70% in valuation this year. The market cap of EGW Capital is now less than a billion dollars, near to the US $850 million.

On the other hand, EGW Academy(EGWA), the blockchain certification arm/online education arm, gave a splendid performance by gaining over 204%. The market cap of the education business has crossed over the US $130 million.

EGW Capital focused on the Indian markets and invested a considerable sum in scaling the business, which was then challenged by the Indian government, which then considered both crypto and tokenization as a legal offense. In March this year, the Supreme Court of India ruled in favor of the blockchain community, but days after the good news, a nation spread lockdown due to the Covid-19 pandemic happened. Indian economy struggled all the way, and the companies focused on blockchain listings saw their progress on the clients getting paralyzed due to unforeseen circumstances.

If we compare the performance of WazirX (WRX), India’s largest crypto exchange, it lost over 63% in the market cap. Despite the flourishing crypto market in India still, the listed token of WazirX is struggling. More and more people moved to Bitcoin and Ethereum after the Supreme Court’s verdict, but even the crypto exchanges saw decreased valuations and unwanted performance pressures.

So what triggered this downside? The first and foremost reason is delayed judgment by the Supreme Court of India, which forced many blockchain businesses to start focusing on the alternative Asian markets and to foray into an alternative crypto business-like market making. The second reason is that the Covid pandemic has forced many people to shift towards Bitcoin and Ethereum. Both Bitcoin and Ethereum are not dependent on the successful execution of any business model, and they often behave like a store of value. All the people who missed out on stock exchanges and gold price rallies worldwide ended up buying Bitcoin and Ethereum, giving major cryptocurrencies the boost they wanted. Bitcoin is now trading at its all-time high and sees more active interest from the day to day traders.

The altcoins market is struggling because the altcoins holders are cashing their position to participate in the Bitcoin and Ethereum price rally. However, the trend will change sooner or later as altcoins had created maximum wealth for the investors when Bitcoin and Ethereum underperformed and remained sluggish.  Third, delayed Initial Exchange Offering (IEO) of EGW, the company has to mobilize the retail market funds and provide an exit to its existing investors. In the absence of more retail markets, the investors sold heavily on BitLux OTC exchange; thus, it pressurized the token performance.

So what’s the future of EGW Capital? The company is working hard to add more clients and earn more equity percentages in the business. Any company that hires EGW Capital pays 10-15% in equity. Imagine a company commanding a US $100 million market cap pays the US $10-15 million in equity fee! The company currently has 14 active public or private offerings in the pipeline and is near expanding its market-making business, which can emerge as a trustworthy cash cow business. The listing business revenues may jump many folds as crypto tokenization, and listing is the future and is gaining global acceptance.

When the whole world is adopting the concept of tokenization, it is evident that EGW Capital will benefit due to its first-mover advantage and dominant position in the crypto markets.

We assume 2022 may end up as a great business year for EGW Capital, and it may end up reclaiming its US $2 billion market cap. We expect a 100% upside; however, one should closely watch the economic developments worldwide. More and more companies are now looking to go public, but the Covid pandemic has devalued most of them, and there may be a case that companies may wait for a better time. However, EGW Capital is actively promoting its tokenized debt products, which will help companies raise funds quickly and at better rates. On the other hand, the listed bonds will develop an active trading market for the investors who do not wish to remain locked till the end of the tenure.

An email sent to Rahul Kumar, CEO of EGW Capital, resulted in no response until publishing.  

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