Ask Me AnyFin with Akshaya Bhargava: Applying AI to Crypto Investments

Would you let AI invest in cryptocurrencies for you? For this Ask Me AnyFin session, we meet again with Akshaya Bhargava, the founder of Bridgeweave, to talk about his new AI-powered product that makes it easier for investors to enter the crypto space. Read the interview to find out more about regulations in crypto, the importance of retail investment, and the challenges for new crypto investment products.

Wealth management expert says, “Ask Me AnyFin,” and is not afraid to answer

Watch the conversation with Akshaya or read the transcript below.

A look at the wealth management landscape

Małgorzata Łabanowska: Hello, our guest today is Akshaya Bhargava, who is the founder of Bridgeweave, the company behind InvestorAi, a smart tool that helps retail investors make informed decisions about their assets. We had the pleasure of speaking to Akshaya last year about the merits and the vision behind his product. Today, we’ve met up again to hear an update on the key developments and his general views on the FinTech landscape. Hello, Akshaya.

Akshaya Bhargava: Hello, Małgorzata. Great to see you and talk to you again.

Małgorzata Łabanowska: Thanks to your vast experience in wealth management, you have a deep understanding of the financial sector and how it’s evolving. From your personal perspective what recent changes in the financial industry do you consider the most impactful and how do they influence the development of Bridgeweave’s suite of products?

Akshaya Bhargava: I think something wonderful is happening in the wealth management world. The old model of wealth management is that I do things for you, for which you pay me. So I give you advice, I manage your portfolio, and I basically do things for which I get paid. 

The new generation, what I call the digital generation — not necessarily millennials but anybody who’s digital-friendly — the digital generation is not like that. They don’t want to deal with banks. They don’t want to deal with wealth managers. They don’t want to pay for advice. They want everything on their mobile phone. And if they want everything on a mobile phone, then there is no place for an advisor to come in and do anything.

I think this behaviour is going to change the model. And I think the model will be driven by the new generation who wants low cost services. They want access to everything and not selective kinds of things. They want everything digitally and they want transparency and ethics and ethical behaviour. Now, I’m not saying wealth management cannot deliver that, but it is very difficult for them to do it digitally. 

I think what is developing and will become big now is a new model for wealth management, which won’t be wealth management, which I’m calling wealth enablement, where instead of paying me for things I do for you, you pay me for tools and services that I give you that allow you to do what you want. Self-service is a big part of it. Things delivered on your mobile phone is a big part of it. Low cost is a big part of it. Transparency is a big part of it. Easy access is a big part of it. The right asset classes, which, in my view, are equities and crypto. They are not funds, they’re not ETFs, they’re not bonds, they’re not commodities. It’s ETF and crypto mainly that is a part of it. There is a whole new model that is emerging in the world. And last thing I will say is that if I was a wealth manager today, I would really be worried about it and I would be doing whatever I can to position myself for the future because in the next five years it won’t affect me; in the next 20 years it’ll change my business.

The importance of decentralised finance

Lucas Korol: Great. You mentioned crypto. In your opinion, what is the perspective for decentralised finance as a concept or the reality that we are starting to see and what value does it bring to the participants?

Akshaya Bhargava: Crypto’s got a bad name because it started with a notion of anonymity. And because it was anonymous like cash, it gave rise to a lot of criminal activity and money laundering and some of the bad things. A lot of people think the only purpose crypto has is for criminals and money launderers. I don’t think that is fair. There is some element that has become standard, but more and more, from what I’m seeing, the anonymity aspect is changing. Today, if you go to open an account at Binance, which is the biggest crypto exchange in the world, you have to go through rigorous KYC. Now it’s all digital, so it’s not difficult, but you have to show your face. You have to take a photograph, you have to do a selfie identification. You have to put proof of address. You have to put [in] a passport or driving licence. You can’t just simply open an account in any way you like, so I think that is changing.

I think decentralised finance is a broad-brush notion for an architecture and a protocol that is not owned by one entity, and I think there’s a lot of power in that.

Take a mutual fund, for an example. Today a mutual fund costs anything between 100 to 200 basis points and fees. Those fees are used to compensate the fund manager, to pay for the investment activity, the operations activity, reconciliation, accounting, bookkeeping, all of it. Now just think: what if you could completely automate accounting, bookkeeping, etc., and embed them in the blockchain as smart contracts so no one can change it? Then there’s no variable cost to this.

Also, think what if the investment activity could be done with artificial intelligence. Then a lot of the traditional investment costs disappear, and suddenly you could run a mutual fund at 15 basis points instead of 150 to 200 basis points. And so you could actually create an actively managed fund at costs that is less than Vanguard, which is a passive form. That is a massive, huge implication.

And I’m just using one example of the investment industry. There are examples in the supply chain. There are examples in payments, in healthcare. There are examples in transportation that have similar impacts. So I think decentralised finance done correctly has an opportunity to bring the cost structure down hugely by automating certain routine activities.

Małgorzata Łabanowska: How do you think decentralisation and wealth enablement complement each other?

Akshaya Bhargava: Wealth enablement is empowering the individual investor to do things on their own. It essentially means no one’s in charge.  Decentralised finance also means no one is in charge. I think what will happen is these two things will converge, and decentralised finance will create more and more tools and things that the wealth enablement model could use. So each reinforces the other.

The wealth enablement model creates a model where it encourages individual investors to do things on their own. The decentralised finance model creates the tools for people to do things on their own.

So both supply and demand come together in this manner.

What kind of regulations the crypto space needs

Lucas Korol: When we talk about decentralised finance and crypto, there is always a question about regulations. I read your article about it recently and you were saying — correct me if I’m wrong — that there is a need for some level of regulation to actually drive the adoption of crypto or decentralised finance in general. But in theory, it sounds like some kind of a contradiction, because this is not regulated by design. So I’m really curious how do you think the regulation can help and in what aspect, how this can drive adoption for in this case investors.

Akshaya Bhargava: It’s going to be a slightly longish answer, but my simple view is that regulation is very good for the crypto industry. Why? Because it’ll encourage adoption. Because today if you want to do something in crypto, you have to be a crypto wallet or a crypto exchange. If Barclays, or JP Morgan, or City Group want to get into crypto, they won’t because they don’t know what the regular rules are. So none of the big boys are getting into crypto. The moment the rules become clear, the big entrance will come into crypto. And the moment they do, mass adoption will happen. 

I think good regulation done the right way can cause the crypto industry to explode. And when I say explode, not grow two or three times, but grow a hundred times bigger than it is today. I think that is very good for the industry. 

So if you agree with my thesis that regulation is good for the industry, then what is regulation? I think that is a very big question. What kind of regulation?

I think the core of the crypto industry, which is its ability to work in real time, to work 24 hours a day, never stop real time settlement, real time trading, etc.; these are phenomenally good things. They should never be changed.

Where can regulation help? So firstly, at the point of entry, you must have KYC. There is no reason why anybody should be anonymous, because that just gives rise to criminal activity. Secondly, there must be controls around what kinds of tokens and coins you can issue. Today anyone can issue anything. That is where a lot of fraud does happen. So there must be rules around what you can issue. Just like you cannot just issue… You know, go and do an IPO. There are certain rules you have to follow. I think some of this kind of rules have to come in what kind of coins you can issue. Thirdly, there have to be controls around misselling and the fact that anybody can come and say, “I’ll double your money,” but they can’t double their money just like that. So there must be controls around bad selling and vulnerable investors. 

Then there can be very simple controls around how you actually service a customer. If you go to Binance today, you cannot find a customer help desk number. With great difficulty, I found one. It was buried in some small page, 18 levels down, then you find this is the support you may refer to. That is not good. Customer support must be front and centre. There must be a number you can call. There must be ways to get in touch with these providers without having to resort to 100% bots. These are very simple regulations, but that is where it’ll give confidence. It’ll make it easy. If there’s a problem, it’ll get sorted out and there’s a code of conduct that people can adopt. So that is how I think about regulation. 

My final point is that crypto is a global product. You may live in Poland, I may live in London, someone may live in Venezuela, but if we both all buy Bitcoin, we are all holders of Bitcoin. It doesn’t matter where we are. So there is limited value in one country putting regulations and the rest of the countries are not doing anything. So there has to be some kind of cooperation between regulators to create a common code of regulation or whatever.

Now you can say: how is that possible? That has never been done. It has been done. If you look at the International Chamber of Commerce (ICC). ICC has issued a very rigid document — it’s not very long — around how trade practices should work, around debtors or credit, around documentary bills of exchange. And it is very well documented. It is very well understood and followed.

There are, if you look at capital markets, swap transactions. So there is something called ISDA, International Swap Dealers Association. They have created a standard document. So whenever you and I enter into a derivative agreement, that is the standard document we’ll sign. International cooperation has produced results. And I think that is very important in crypto as well.

Challenges a new crypto product might face

Małgorzata Łabanowska: You’ll soon join the crypto reality and it’s a really exciting time for your company, Bridgeweave, as you are nearing the launch of your new crypto product. What do you foresee as upcoming challenges?

Akshaya Bhargava: Our product is going to be a fantastic product and it’s not just because I say so. What is the problem in the crypto world today? I don’t know what to buy. I don’t know when to buy. Once I buy, I don’t know when to sell. And because it is 24 hours, I worry what if something happens when I’m sleeping or on the weekend.

So how can I manage this? It feels very intimidating.

What we have done is we have created a recommendation engine that basically tells you what you can buy and it’s based on AI. It’s really a smart recommendation engine.

All our recommendations are very short recommendations: two hours, three hours, four hours, five hours. So the next thing we have done is if I give you a two-hour recommendation, by the time you go and buy, the price has changed. So we have created some trading bots and created a transaction engine and attached that to the recommendation engine. 

So what does it give you? Basically, it tells you what you can do. And then if you say, “Yes, go,” it’ll do it for you. It’ll go buy, it will go sell. It’ll set your stop loss and your profit target. It’ll monitor constantly. And it’ll sell when it needs to sell. You can also say that once I finish a three-hour cycle, please keep going till I tell you to stop, then it’ll keep going forever. So if you do nothing for one year, it’ll keep investing for one year, one after another.

It’s a phenomenally powerful concept. We have backtested this for over 10 months. We are now live testing it with real money. I’m one of the live testers, and it is doing really, really well. So I think we are coming up with a product that doesn’t exist in the market today. It is a really first of a kind, a very easy tool. Now, it is not without challenges.

There is no point in a product being very easy to use if no one knows about it. So communication and distribution are the challenge.

We don’t take any money from you in the sense that we charge your fees, of course, but the money sits in your exchange account. So if you have an account with Binance, all the money sits in Binance. All we need is an API key from you so that we can do trading on that account. A lot of people feel nervous about how to use an API key. Is it safe, etc.. There is some point of friction at the point of entry, but once you’re in, there is very little friction.

So just educating people, getting them comfortable with it and helping them make money, helping them understand. I think those are going to be the challenges we will face, but they are exciting challenges because I really think that what we are doing is going to make it very easy for everyone, whether you are an existing crypto investor or not an existing crypto investor, for anyone to get in the market and be able to have a crypto portfolio.

How InvestorAi’s algorithms make investing in cryptocurrencies easier

Lukas Korol: You are saying that you combine somehow the input from the user, from the physical person, and combine this with the AI that you have, and this creates this powerful solution because it’s a combination of you as a person plus AI that assists you as an investor. So how does this play out with crypto? How does this help in practice?

Akshaya Bhargava: Your investment appetite is always your investment appetite. I’m not the same level of risk taker as you are. You are not the same level risk taker as Malgorzata, she’s not the same risk taker as me. So everybody has a different view of the world.

Małgorzata Łabanowska: I’m curious who the biggest risk taker is.

Akshaya Bhargava: I don’t know who the biggest risk taker is, but all of us have a different definition of risk and a different view of risk. It also depends how old you are. Sometimes when you’re very young, then nothing matters. You go into what you want, you make a mistake; nevermind if you’re 25 years old. When you get older, then you can tend to get a little more careful or you might take a completely different view that I’ve made enough money, now I can take as much risk as I like. So it’s very individual.

What we have done with crypto is giving you the ability to dial up or dial down the risk as you like. So let me go into the details of the algorithms that we have. One algorithm that we have is called Alpha Hunter. The objective of Alpha Hunter is to create low volatility alpha for you, okay. We cover 54 currencies. These are the most liquid currencies in the market. We then create a look at the probability of each currency, delivering a positive return in two hours, three hours, four hours, five hours, six hours — five cycles. So 54 currencies, five cycles. So we do about 270 calculations every five minutes.

When you come to invest, you decide how much you want to invest. You decide what your profit limit is. You decide what your stop loss is. And you decide whether you want to make it a continuous investment or just one-off. Continuous investment is good because it compounds your returns. So once you make all these decisions, we overlay this with the underlying thing that the AI has generated. We then figure out what is the best cycle for you to get it today. And the machine then decides how many currencies to buy. It could be two, four, or six. It decides which cycle to take: two hours, three hours, four hours, five hours, six hours. So it has 15 choices. 

It may say, “Okay, I will buy four currencies for Lukas for the next three hours.” And then it will buy that, and it’ll monitor your price limit, etc.. [It will] do that for you and then keep going. If you’re an adventurous investor, you want to make money rapidly, you want it to compound, this is a great way of doing that for you. You make very few decisions here. 

The second one we call the Accumulator. The Accumulator is very different. It is aimed for people who say, “Oh, I want to put some money in crypto, but what do I do?” So I go and open an account with Binance. I move $5,000 into it and then I buy Bitcoin. And then what do I do? That is over in 10 minutes. After that, I have no idea what to do. So I say, “Okay, I’ll hold onto Bitcoin.” Hoping it’ll go up and it’ll fluctuate.

What our algo does, it forecasts the price of Bitcoin in the next six hours. And it makes that prediction every 15 minutes. If the prediction is that the price is going to go up, it does nothing. If the prediction is that the price is going to go down, it switches your Bitcoin into U.S. dollars. And if the price has actually gone down, you have avoided the deep. At the end of six hours, it buys you back into Bitcoin. And if you buy back at the lower price, you end up with slightly more Bitcoin than you started. Hence the name Accumulator.

Now, if you do every six hours, you’ll get some cycles right, you’ll get some cycles wrong. Some will be up, so you’ll do nothing. But over time, we have seen it, it accumulates very powerfully. So over a 10 month period, we found an accumulation of 96%. So if you started on day one with one Bitcoin, you ended up at 1.96, almost two Bitcoin at the end of 10 months. That is very safe, very powerful. Do nothing, just sit back and wait. So we’ve catered for different kinds of things.

Then there are other algorithms we are coming up with. So what it does, it allows you to tailor your risk appetite. Now, it is a machine and of course it works well, but it also underscores the importance of personal choice and personal decision.

This is what I mean by the wealth enablement model. The model I’m promoting is a model where the individual can decide: this is good for me and this is not good for me.

It is not some advisor telling me that… If you go to an investment advisor or a Google advisor, they have five risk categories. So basically they’re saying that one fifth of the world is the same. How is that possible? And they’ll put you in the same portfolio, same everything, same all the time. I think that goes against choice.

I think the combination that, in my mind, produces the magic is AI plus your sense. So “you plus AI” is what I always call this. It is true for equities, it is true for crypto. It is true for anything. You can have a beautiful car, all automated features and things like that, but if you don’t know how to drive, you’re not going to have a good experience. So a great experience is created by man and machine together and in the right way.

The impact of retail investment on the market

Lukas Korol: Before we finish, we would like to come back to the general topic about how wealth management and retail investment, in our case, will be evolving. I would like to just go deeper with one specific aspect, because this is a question of how much retail investment will be affecting the whole investment space, or if it will always be something marginal that is actually not shaping the whole investment space, because it’ll be still and always occupied by traditional models, traditional wealth management businesses?

Akshaya Bhargava: Excellent question. My view is that retail investment is a very good thing for any country, and I’ll tell you why. In a stock market, you have institutional investors like hedge funds and so on, and you have hedge funds and mutual funds, and you have retail investors. If you look at the volatility, not in terms of price, but in terms of flows, the institution flows are much more volatilised than retail flows because institutional investors have many choices, they can go into bonds, they could go into derivatives, commodities, FX. So they have many choices.

Retail investors tend not to have that kind of choice. Just in a volume volatility way, retail investment is a lot more stable. Whereas institutional money is very volatile. If you’re a national stock exchange, you want the right mix. You want some other institutional money to come in because that moves the markets and it’s a sign of confidence and so on, but you want enough retail to give it stability. Otherwise the market becomes a crazy kind of thing.

I would argue that the more retail investment you have, the greater stability you have in the stock market in terms of people. It reduces the element of what is called hot money.

India for instance, is a very good example. For many years, the biggest part of the Indian stock market was international funds coming to invest in the Indian market. And when some other market became hot, they just moved all the money out. So the market used to go like that (waves his hand up and down). In the pandemic, almost 30 million new investors have come to Indian stock markets. The recent volatility in the market didn’t change very much because a lot of stability is created by the retail investors. 

I think in a macroeconomic sense, it’s a very, very important aspect. In a personal sense, I think it’s also very important because it begins to create that connection between the individual and the markets. So everybody has a personal understanding and a personal view of it rather than simply reading about it in Sunday newspapers.

Małgorzata Łabanowska: With the second aspect you mentioned and also the product that you are promoting, I think you are democratising the access to wealth.

Akshaya Bhargava: I think what I’m giving is I’m giving people a choice. I’m allowing people to get into asset classes they’ve never been able to. People who don’t know how to invest in crypto and say, “Nevermind.” You don’t have to know how to do it, we will do it for you. You still have to make the decision, it is your investment. We are not advising you. We’re not saying it is good for you. You have to decide what is good for you, but if you decide it’s good for you, we will make it very easy for you to enter.

Małgorzata Łabanowska: It’s also very interesting that the more people have access and have this opportunity to invest, the more stability we have. This is also very encouraging.

Akshaya Bhargava: Yes, exactly.

Advice for new investors

Małgorzata Łabanowska: So you’ve given us a wealth of insights. And before we finish, I just want to add a question about how we should approach investing as retail investors. What piece of advice would you give someone at the beginning of their investing adventure?

Akshaya Bhargava: I would say to a new investor: start as early as you can. Because what people don’t realise… People look at returns. But if I invest over two years, then of course, returns are the most important. But if I invest over 20 years and I keep reinvesting my returns, the compounding of returns creates a bigger impact than the returns themselves. I would rather have a compounding investment over 40 years that had compounds at 7%, than an investment over five years that gives me 20%. I will make much more money that way.

So if you’re a young person, like both of you are, you’re at an early stage of your career, you must invest and you must stay invested. All the in and out doesn’t help.

My advice to a young investor would be: Firstly, invest as early as you can, as much as you comfortably can, and then stay invested.

Secondly, there is so much intelligence and tools that are available to you, use them. Make use of them. Don’t depend on advisors, they don’t know any better than you do. Don’t depend on banks. Do it yourself. If you want your investments to be managed by somebody else, try and understand what they’re doing, why they’re doing, ask them questions. They are obligated to answer. The longer you have to invest, the better off you will be, because then you get the benefit of compounding.

So I think investments are very, very important. I actually believe just the way we teach English and arithmetic and geometry and algebra and history and geography.

We must teach investing in schools. Why are we waiting till you’re 18 years old? We must start when you’re eight years old.

Give them the basics. I don’t want anybody growing up: “Oh, I don’t have a head for numbers. I cannot invest.” No, you can do mathematics. No, you can add and subtract and divide. You can do investing. That is all it takes.

Małgorzata Łabanowska: Thank you. Stay invested. This is definitely the piece of advice I’m gonna take with myself and I plan to use it literally and metaphorically too.

Akshaya Bhargava: Thank you very much.

Małgorzata Łabanowska: Thank you, Akshaya, for giving us your time. It’s been a pleasure listening to you and finding out more about the product that you are promoting.

Akshaya Bhargava: Great pleasure to speak to both of you again, and thank you so much for inviting me.

Lukas Korol:  Thank you. Fingers crossed.

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