Cryptocurrency Investment Firms are on the Rise
When ICOs go boom, Crypto Funds go Bang
Crypto projects and blockchain startups are still a new class of assets and predictably, there’s been quite an increase in crypto funds since ICOs went out of style.
In the last year including the first eight months of 2018, there are 300 crypto-focused funds that have sprung up (TechCrunch).
The way we invest in crypto will continue to diversify. Projects like Bakkt are showing the way to how new kinds of digital assets will go more mainstream.
When Linda Xie left Coinbase, who knew that she would become the managing director at Scalar Capital? Along with Jordan Clifford, they are just one example of people taking risks to invest in the future of cryptocurrencies. A long list of finance talent are moving to blockchain startups from the likes of Goldman Sachs and J.P. Morgan Chase. Some of the projects are affiliated with Wall Street while others are less so in their new projects.
I discovered Linda Xie when doing research on a story on Women in Crypto and I became impressed with the insights she provides on Twitter. She’s like a mirror into the heart of crypto.
Now Scalar Capital have raised funds from noted investors Marc Andreessen and Chris Dixon. They are growing fast, also because the time is right in the space: regulation is moving faster and Wall Street is taking the space more seriously in some large part due to the rise of cryptocurrency exchanges and apps like Coinbase, Binance and others.
According to Forbes, Scalar cofounder Linda Xie, 26, has been passionate about investing since college, when she was president of the investment club at UC San Diego in 2011. Ambassadors and role models for women in crypto are few and far between, but as a women-in-tech enthusiast, in my own heart I see Linda Xie as a shining beacon of just that, someone like a Tracy Chou of blockchain, who can inspire a generation of young women to enter the space.
That being said, I think Scalar Capital is very well positioned. Linda was formerly a product manager at Coinbase and this kind of pedigree and network definitely helps. Bain Capital Ventures, Coinbase cofounders Brian Armstrong and Fred Ehrsam, and angel investor Elad Gil also invested. Total assets for Scalar have already reached $20 million as of August, 2018. Silicon Valley still has a lot of swag, whatever Crypto Valley, Singapore, Berlin and other global hubs are up to.
The Rise of Crypto Assets is Definitely on the Horizon.
Increasingly we are seeing mainstream Financial Services taking a hard look at crypto. Wall Street is showing greater flexibility to offer Bitcoin Futures and more products as the space becomes more mainstream each year. Scalar Capital itself, is brand new, founded in September, 2017. But by simply watching the speed at which it is growing, you can bear witness to how Crypto Funds are coming into style.
The way we evaluate blockchain startups, rate ICOs and invest in crypto is all rapidly changing and becoming more regulated. Bitcoin Futures, ETFs, crypto mutual funds and new kinds of digital assets are all happening and inevitable. On May 2nd, 2018, Linda spoke to Y Combinator; you can watch it here.
That former Coinbase employees would go the route of a Crypto Hedge Fund is super interesting. ETF delays and a bear-ish market for Bitcoin be damned, pre-2020 it’s the time to take risks. A Crypto Hedge Fund is a pool of liquidity consisting of publicly traded cryptocurrency assets. As Linda Xie is a compliance, security and privacy vet in the space, it’s no surprise that Scalar Capital is somewhat specialized in privacy-based altcoins.
Millennial Interest in Crypto Assets is a Game Changer
The way Millennials approach investing in crypto assets and currencies is much different: they are looking for alternative ways of optimizing their savings. Cryptocurrencies become more mainstream in investing just as Millennials are reaching maturity and higher income brackets. Thus even in 2018, the trajectory of J.P Morgan types like Jordan, are indeed to end up working in crypto or blockchain in one shape or form. These are not just rare anomalies, this is the way wealth asset management is going, first at a trickle, and finally a flood. In that sense, these folk are the pioneers.
If Coinbase’s tremendous growth shows that Coinbase is a training ground for entrepreneurs, it’s important that the likes of Coinbase and Binance alumni pivot and create their own projects to help diversify the space. I think we can assume this will occur fairly rapidly. As the multiple ecosystems take shape, and regulatory hurdles are ticked off, the way Millennials and GenZ will interact with crypto will be completely different from what Wall Street is today, in 2018, more or less a legacy system that only the upper middle class can afford to play.
Since cryptocurrencies are quite irrational, volatile and chaotic still, Crypto Funds, ICO rating portals and the like bring some level of sanity to the mayhem. Investors, however, increasingly want in on the space, as the high risk-high reward ecosystem could mature into rather substantial gains if you play your cards right.
Bullish on Next-Gen Privacy Coins
According to the Forbes article, for digital payments, Xie and Clifford believe in “privacy coins,” cryptocurrencies that hide the identities of buyers, sellers and transaction amounts. Xie sees bitcoin as a buy-and-hold asset — like gold — instead of a payment currency.
Bakkt speaks about “digital assets”, and Wall Street is bullish on blockchain, not as crypto but as micro payment ecosystems. Some can fathom Facebook making an altcoin for transactions on its own platforms that would feel more like P2P transactions such as Zelle, Venmo or Square Cash provide today in the real world for Millennials on mobile. The fate of public blockchains such as Ethereum, Cardano, DFINITY and others remains to be seen — even as they attract daily active developers in their communities, the market for investing in crypto assets can only increase in 2019 and onwards.
The reality is from private blockchains like IBM’s to public blockchains and the march of crypto becoming futures, ETFs, mutual funds, credit cards and entirely new asset classes is as sure as blockchain becoming more implicated in the business world, the Cloud and decentralized value chains.
Scalar Capital is bullish on crypto assets with a core focus right now on privacy coins, which they think are undervalued. But their also investing in different smart contracts platforms and scaling solutions — different technologies that they think are going to be a big deal. Linda’s husband is actually one of the founders of a prominent privacy orientated altcoin (the 23rd ranked one apparently).
Linda Xie was actually interviewed by Y Combinator recently, and it was so good I spent several hours editing this. Scalar Capital, it turns out, has one of the most lucid speakers on the future of crypto assets. Check it out below, I think you might agree:
Linda Xie takes questions on the future of crypto assets. Spring, 2018.
I’m a blockchain historian covering the best stories in crypto, decentralization and future trends.