Q&A With a Crypto Fund Manager

Bitcoin and cryptocurrency are all the hype nowadays, here are my responses to some of the most common questions I’ve been receiving…

Why is Bitcoin’s price soaring? Is it a Bubble?

Bitcoin’s price is soaring as a result of extreme demand for the asset. Since many larger players have purchased BTC and held it, the supply of BTC available for purchase has continually shrunk, thus driving up the market value.

Its not a bubble. Bitcoin is a technologically superior product to any financial asset in the history of the world. Now anyone can be in full control over their capital without relying on a bank or government.

To me the real question is not how high Bitcoin will climb but rather how low fiat currencies will fall.

Hedge Funds can now short Bitcoin!!! Should I sell and then re-buy after it drops?

I say no.

Yes the emergence of options trading on CMO & CBOE could result in a short interest, thus driving the price of Bitcoin down in the short-term…but it also allows a whole new class of investors to place bets on cryptocurrency.

Right now one of the larger drawbacks in the crypto sector is the lack of options for institutional investors to place bets. Providing larger investors with new avenues to participate in the crypto market will result in a huge flow of new capital into the space.

What exchanges are you using?

Coinbase is the easiest way to get in the game but their fees are high, the service has outages and it takes days to get fiat currency in your account.

Personally I’ve shifted all of my BTC & ETH trading to Gemini…25 bps fees, pre-credited deposits and the price of BTC has been as high as $2k lower than on Coinbase.

For alt-coins I recommend Bittrex or Binance, keep all of your coins on hardware wallets. My personal favorite is the Ledger Nano S.

Why are bankers so angry about this?

Crypto is a new asset class. Every new asset class comes with a ridiculous level of scrutiny.

Blockchain has the potential to replace many of the traditional functions of a bank. Banks have it good as is, status quo is what they prefer. So I can’t say I’m surprised when I hear Jamie Dimon lashing out on Bitcoin as a fraud.

People do irrational things when they feel threatened.

Should I buy ETH or LTC now that Bitcoin has gone parabolic?

I think BTC is still the best risk/reward at this given time and as such I believe it should make up ~50% of a diversified crypto portfolio, if not more.

I view Bitcoin as a digital form of Gold…Gold has a market cap of $8.2 trillion, Bitcoin’s market cap is approaching $270 billion, or 3% of the gold market.

Which other coins do you like & what do you look for?

Personal favorites include Monero, Vertcoin & SALT.

I look for coins with a hard cap on the supply, this way there is no fear of dilution down the road. In altcoins I also look for a coin with a truly innovative use case with an enormous market opportunity.

Coins with greater levels of privacy, like Monero, will be poised for huge growth as the crypto market becomes more sophisticated. Similarly a coin like SALT will provide users the ability to borrow against their crypto holdings, a transaction that is common in the real estate industry to avoid capital gains from exiting positions.

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Tom is a Co-Founder of SportsCoin Ventures, a crypto fund based out of NYC.