Notes from NY Crypto Hedge Fund Summit

Thank you Trade.Terminal (leading Chinese-American crypto hedge fund) and Liaoyuan (next generation platform for bridging Chinese and American VCs and early stage startups) for an excellent 2018 NY Crypto Hedge Fund Summit!

The invitation-only Summit brought together managing partners from such leading crypto hedge funds as Polychain Capital, Galaxy Digital, Pantera Capital, FBG Capital and others. Our fund TMT Blockchain Fund was represented by myself and our senior portfolio manager Gabriel Francisco. I had a chance to speak about regulations applicable to crypto hedge funds, drawing from my experience as GP and General Counsel at TMT Blockchain Fund, a $60M VC fund investing in equity and tokens in blockchain tech startups.

Given the curated audience and content, the Summit provided a lot of useful insights into the current state of the crypto hedge fund community. Below are some of my notes made during the red eye flight back to Los Angeles:

1. Statistics of total dollars invested in ICOs in late 2017 and 2018 to date show a healthy market — but it is skewed! Bigger projects — think Telegram, EOS, Basecoin and similar scale — take all of the available capital. Lately it looks more like a “winner takes all” approach. Little capital left for smaller early stage ICOs.
2. Number of ICO companies plateaus — less deals on the market but on average they are higher quality than a year before.
3. Given the state of regulations today, the ICOs begin to look more and more like traditional equity financing deals — more emphasis on legal and financial structuring.
4. Numerous crypto funds believe that STOs (security token offerings) are the future and expect an explosion in number of such STOs in 2019.
5. Influx of institutional capital into digital assets is still severely limited by lack of infrastructure — high demand for custodian solutions, insurance, scalable trading technology and banking partners. It is not a question of “why” but “how” for many large institutional players eyeing the digital assets space. Give them the tools and they will join.
6. As more players enter the crypto trading space, the amount of arbitrage and hedging opportunities decreases — becomes harder to get allocations in popular token sales, less possibilities for information asymmetry and arbitrage. More players entering — lower returns overall = more stable and mature market for digital assets.

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