Bitcoin Doubters Not Stopping Managers from Taking Plunge


[originally published By Lydia Tomkiw October 4th, 2017 in FundFire, here. Paywall requires password. Features Crypto Asset Management's Managing Director, Tim Enneking.]

More hedge funds continue to launch or dip into the cryptocurrency sector, even as debate and skepticism is growing about its investment prospects, with big industry names staking out their views and new questions about regulatory issues surrounding the space.

Bridgewater Associates founder Ray Dalio described Bitcoin last month as a “highly speculative market” and a “bubble." JPMorgan Chase CEO Jamie Dimon called Bitcoin “a fraud” and compared it to a boom and bust that will be “worse than tulip bulbs.” And a common refrain from critics has been that cryptocurrencies offer a haven for illicit activities.

Others are signaling caution but not full reproach, such as Goldman Sachs CEO Lloyd Blankfein, who tweeted yesterday that he has not yet reached a conclusion regarding Bitcoin.

Yet more managers continue to launch cryptocurrency hedge funds, as reported. Former Fortress Investment Group macro manager Mike Novogratz is the latest example, setting a $500 million target for his new hedge fund, Galaxy Digital Assets Fund, including $150 million of his own money, as reported.

The hedge fund cryptocurrency landscape is a complicated and still emerging one, said Olaf Carlson-Wee, founder and CEO of Polychain Capital, a hedge fund with over $250 million in assets under management, speaking at the Seward & Kissel and Bloomberg BNA Private Funds Forum last week. “This space is very noisy and esoteric… For your average person it can often feel impenetrable,” he said.

But the tone of the wider debate strikes some as overheated. Dimon’s attacks are “ignorant,” says Timothy Enneking, managing director of Crypto Asset Management, a cryptocurrency trading fund with over $10 million in assets under management that launched in July and trades in 50 different types of currencies.

“He didn’t blindly attack everything in the cryptocurrency space,” Enneking says. “He didn’t attack blockchain or cryptocurrency in general. What he attacked was Bitcoin.”

Enneking himself was skeptical of the cryptocurrency space nearly five years ago, before studying the area and determining “there’s a niche that could be filled by crypto.” There are fair criticisms to be made of Bitcoin, including its stability, he says.

Enneking spends a lot of time explaining the space and advises, “You’re an idiot not to invest in the crypto space but you’re also an idiot to invest too much.”

To grow the market, cryptocurrency managers also should welcome more regulatory guidance, Carlson-Wee said. “When it’s a little unclear, it hurts the good actors more than the bad actors,” he said.