19 Mar Cryptocurrency hedge fund CEO says damn the Sock Puppets
“In the midst of chaos, there is also opportunity” ~ Sun Tzu, The Art of War
The sage advice of 5th century BC Chinese general, military strategist and philosopher Sun Tzu is often quoted by captains of industry and entrepreneurs.
This week in a client investment letter, Pantera Capital CEO Dan Morehead seems to be following Sun Tzu’s theory of chaos providing opportunity:
” I will admit right up front that if your objective is to sell newspapers, solicit academic grants, or throw your banking competitors off the track, railing against bitcoin may be an entirely rational strategy. However, if your job is like mine — prudent management of peoples’ capital — it is irrational to have zero exposure to something that (1) might be the future payment rail of the world, (2) that might become digital gold, (3) that might replace Wall Street back offices, (4) that might enable billions of people in the developing world to improve their lives with bank-free mobile money — and so forth, as Use Case (n) → ∞. Bitcoin is the Miracle Whip of Finance™.”
In other words, in the middle of cryptocurrency chaos, there is ample opportunity for investment warriors.
“Miracle Whip” of finance
He calls bitcoin the “Miracle Whip of finance” and Morehead believes that even in the doghouse of bad ICOs, bad bitcoin investments, blockchain bumbling and cryptocurrency chaos, it takes just one or two home runs to pay off for investors.
In his recent client letter Morehead writes: “That’s the point. Even if bitcoin is actually Pets.com – and you own it in a portfolio of the 25 best tokens (such as in our Digital Asset Fund) and 25 well-chosen ICOs (such as in Pantera ICO Fund) you will probably do very well. That’s even after we’re down to a single-digit number of blockchains and 90% of the ICOs have gone to zero.”
He highlights the importance of Investing in several digital assets at a time to spread risk and increase potential for a home run return like Amazon.
Pantera rides the gulfstream
Pantera’s own ICO Fund contains a basket of 25 initial coin offerings. It has lost more than 25% of its value this year so far, but Morehouse notes this fund is still up 200% from its founding.
Likewise, the Long-Term ICO Fund remains up 5.9%, though its Digital Asset Fund is down 16.8%. His Bitcoin Fund is down 26.9% this year to date but since inception, it is still up more than 16,000%.
No shortage of cryptocurrency chaos
Global gale winds blow in the bitcoin marketplace. More than half of cryptocurrency is traded in Asian markets. China has completely shut down the crypto market for now. Korea and Japan are strenuously and proactively regulating cryptocurrency exchanges. India is likely to maintain a tight grip if it decides to reopen cryptocurrency trading domestically.
In the US, Congress and regulators are taking a closer view of how to protect investors and consumers, and many in the industry expect a regulatory framework to evolve soon.
It’s not all negative news. Switzerland has proactively set out practical ICO regulations and France is on track to do the same. At the G20 meetings this week in Buenos Aires, there are signals of a desire to find common ground on cryptocurrency regulations
That chaos/opportunity thing again seems to be a simple reality in the new world of digital investments. If you share the warrior’s code and the willingness to follow Morehead and others bullish on bitcoin, he recommends clients keep between 1% and 2% of their portfolio investments in blockchain.
Time will tell if hedge fund managers like Pantera can move fast enough to outflank the chaos that surrounds cryptocurrency markets. I’m willing to bet Morehead has the moves.
You can watch a fascinating debate about cryptocurrency between Dan Morehead and Duke University professor Vivek Wadhwa on CNN.
Author: Jeff Domansky, Managing Editor
Visuals: Sock Puppet via Campaign, Pantera Capital, CNN