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I really wish I knew how he is hedging his bets on this. One of the first rules you learn in managing other peoples money is always hedge the downside. Or put
by chollida1 9y ago
I really wish I knew how he is hedging his bets on this.
One of the first rules you learn in managing other peoples money is always hedge the downside. Or put another way, you need asymmetric upside/downside risk inorder to make any investment.
One of the biggest risks to bitcoin is the old saying that in down markets all products have a correlation of 1. Meaning when panic sets in, leveraged firms, which is almost all hedge funds, have to deleverage.
Unfortunately, in a large crash this means that everything gets sold pushing down prices more and causing another round of selling.
If the US cash equities markets does have a large crash this year, bitcoin is in the cross hairs as one asset that could have a selling spree that retail money has no hope of supporting.
EDIT
Ah this is his venture capital fund, so I guess the LP's are used to not being able to hedge and hence the naked speculation is appropriate....
- ihsw2 9y agoInterestingly, if the bottom doesn't fall out from under BTC in this hypothetical scenario, investors may flee to BTC rather than dumping it into precious metals or overseas equities. Deleveraging comes in many forms and it can bring us to strange places.
- kolbe 9y agoFounders Fund: $3,000,000,000 Invested capital at risk: $20,000,000 (the 'hundreds of millions' is based on how much that investment has appreciated) I think a more appropriate "first rule" would be don't freak out and over-analyze a risk that represents 1% of your portfolio.
- komali2 9y agoJesus, that is some money right there. Always boggles my mind when something in the value of billions is compared to millions. 20 million is .6% of 3 billion. The math is simple and straightforward but the real world metaphor as applied to cash actually blows my mind.
- realusername 9y agoPeople generally have a hard time to understand the dimension between billionaires and millionaires, they are not in the same category at all.
- mikeash 9y agoA million seconds is a bit under two weeks. A billion seconds is almost 32 years. That helps me put it in perspective a little better.
- eric_h 9y agoI've always found using the unit seconds to be the easiest way to convey the scale of billions vs millions. 1 billion seconds =~ 32 years 1 million seconds =~ 12 days Edit: mikeash beat me to it ;)
- pbw 9y agoI agree by numerical value the difference is huge and under appreciated. But like many things wealth is correctly perceived logarithmically not linearly. There aren't hundreds of shades of gray between a millionaire and a billionaire, there are few steps, I wrote about them here http://www.kmeme.com/2017/11/the-richer-scale.html http://www.kmeme.com/2017/11/the-richer-scale.html.
- oreo81 9y agoIs that a joke?
- snappy173 9y ago>I really wish I knew how he is hedging his bets on this. is this a bet or a payoff? is he trying to prop BTC up so that his investors and allies can continue converting their offshore holdings back to USD?
- notyourday 9y agoI am going to guess it is just a modified straddle - fund is long bitcoin and long a promising payment tech that already exists. The idea is that if BTC investment does well then existing payment tech does poorly and if existing one does well then probably BTC would do poorly.
- Jommi 9y agoDo you really feel BTC's feature is still going to be related payements?
- notyourday 9y agoI feel that BTC in future will be studied as the mania that separated lots of fools from their money. I do, however, feel it is a good hedge.
- arrty88 9y agoYou can hedge with futures now right?