Learnings from a Cryptocurrency Conference
Yesterday in San Francisco, about 400 people came together to discuss cryptocurrency investing and fund development.
CoinAlts Fund Symposium
Event for cryptocurrency fund managers and investors to understand investment, legal and operational issues for this…
Demand for this event was astronomically high: apparently a few hundred more were turned away from attending.
For those who couldn’t be there, here are a few takeaways:
Not Even a Few Gave a Fuck about Bitcoin’s Price Crash.
During the week leading up to the symposium the price of Bitcoin and Ethereum — and other altcoins — was dropping like a rock. From $4,600 to $3,100 in a matter of days (it’s rebounded to over $3,700 as I write this). You might expect the loss of real money to depress the energy or dialogue. But quite to the contrary, while people discussed the impetus for the shift in value — Chinese regulation of exchanges and Jamie Dimon’s completely idiotic commentary — it did zero to damper enthusiasm.
This industry expects volatility. As a matter of fact, it may very well be the very instrument of enthusiasm. Up or down, something is happening and it’s happening very fast — and that alone is worth being excited about.
If Ferris Bueller was making a movie about Cryptocurrency, slowing down would most certainly not be his advice.
Always Follow the Lawyers and Accountants.
Lawyers and accountants are the bloodhounds of any forming industry where there are riches to be made. They are amazingly well-trained to sniff out clients — and specifically clients that will have significant needs. The CoinAlts Fund Symposium was put on by Arthur Bell, Cole Frieman & Mallon LLP and a few others, so it’s no surprise that there were a handful of Esquires and CPAs running around. But beyond the sponsors there were dozens of additional firms represented. This is an extremely high signal that this industry is about to explode. The bloodhounds are on the case.
They smell money. Or Crypto.
Hundreds of Crypto Funds Will Launch in the Next Year.
On a panel represented by Blockchain Capital, Pantera Capital, and Blocktower Capital, one panelist noted there were 75 crypto funds already in operation. When the audience was asked who else was starting a fund, about 100 hands were raised. Yes, 100.
Sure, it was the point of the event, but the sheer volume of people trying to raise capital and start a fund is astounding. And, frankly, it seems many are having luck. Traditional investors, pension funds, VCs — they all want to invest in this space. Every 3rd conversation was with someone “just starting” a crypto hedge fund, or fund of funds or international-only crypto fund. See the exhibit above: they’ll all need a good lawyer and accountant.
ICOs are Totally Misunderstood by Entrepreneurs, but Lawyers and Accountants Aren’t Too Worried About That.
This is a super hot button for me, so apologies up front. Listen, entrepreneurs, an ICO is NOT just another vehicle for raising money. It means that you are going to have to operate a token and manage a host of other issues related to marketplace dynamics. Ok, so it takes too long or is too hard to raise venture capital, sure. But let’s be very clear: the devil you know may be better than the devil you don’t. There was a ton of chatter about ICOs at this event — and it makes sense because an ICO means more work for lawyers and accountants. But few were able to rationalize the reality of the situation and many people are raising money for all the wrong reasons. They don’t even know what they are going to do with it. Expect lotsa pain from this one. The ICO frenzy is going to result in a big blemish on this industry.
You Are Marked By The Date of Your First CryptoCurrency Investment
Every introduction began with your quick history of crypto ownership.
“I first invested in crypto in 2011.”
“I got in on the Ethereum pre-sale,”
You are a god among men.
“I was paid in Bitcoin.”
Someone just fainted.
Insurance for Cryptocurrency Funds is a Bitch
One clear complexity of cryptocurrency is the high risk of theft. There are countless stories of money stolen off of exchanges or via some flaw in code (See the recent $34M theft of ethereum via a flaw in digital wallet provider Parity). When pressed about insurance options, no one had an answer. The insurers are apparently too worried about the risk of the space to provide any rational form of protection. So funds and investors remain relatively exposed — it doesn’t seem to be keeping people on the sidelines, but it certainly keeps fear high. Hey insurers, time to get on this one. The opportunity exists to become THE insurer for the cryptocurrency industry. What are you waiting for?
Individual Security is a Very Real Thing.
One of the oft-repeated tenants of cryptocurrency is that “you are your own bank”. And while there’s plenty of chatter about how to protect crypto currency on exchanges and in cold storage — a very real additional risk is to the individual themselves.
Here’s what it looks like: A cryptocurrency fund manager could be targeted, kidnapped and forced to share their keys. Unlike a typical investment manager who doesn’t know how to access their client’s bank account, The Cryptocurrency fund manager IS the bank. Fund managers talked about hiring personal security guards. And not having their name disclosed at conferences they speak at in Mexico. Even more interesting: many set up shell LLCs for their offices, apartments and cars, and remove their names from the Internet, to reduce the likelihood of being targeted. Aye Caramba!
A Final Bonus: Quote of the Event
In an amazing fireside chat with 2012 college graduate and industry superstar, Olaf Carson-Wee (1st employee of @coinbase and Founder of Polychain Capital) noted that the Internet is a major advantage in the pace of development of Blockchain and Cryptocurrencies. To make a point of it, he noted,
“Think of it this way: The Internet would have really helped speed up development of the Internet.”
Point for Olaf.
[When asked if he believed there would be other major currencies besides Bitcoin he slyly noted,
“well…we’re not called SingleChain Capital.”
Second point, Olaf].
If you think Crypto is going big (or that Jamie Dimon is running scared) please clap below.