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‘Wild West’ cryptocurrency markets continue to gather pace and interest, enter the Hedge Funds…

Author: Scott Richardson

Published date: 2017/10

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I have been writing about distributed ledger and cryptocurrencies for some time now, I have also been working heavily within the space to capitalise on the opportunity there. The sector suits my preferred style of recruitment; I have access to decision-makers to help me add maximum value through my insight – this is sorely lacking in some areas of financial markets recruitment. It is also an interesting and emerging technology space that generally hires strong technologists, people who are looking for something a little different when compared with the ‘traditional’ financial markets without nullifying their experience or interests.

Having worked in the space for some time, I started watching cryptocurrency prices and immediately got a bad case of FOMO, there are so many stories of people making a LOT of money by getting in early with bitcoin and making $billions. For example, Mark Komaransky, a former trader at DRW, reportedly bought circa 300,000 bitcoin in the early days (not long ago), he has since retired a billionaire (he was probably doing ok anyway, he was trading cryptocurrencies for DRW who have had a desk working on these markets for four or five years now). There are also many stories of nears misses; a man called James Howells threw away a laptop containing access to 7,500 bitcoin when they were worthless, now they are worth $40-ish million dollars. The most extreme I have heard though, is that Lily Allen was offered around 200,000 bitcoin to perform a concert online for Second Life in the early days of Bitcoin, she turned the offer down, those bitcoin are now worth circa $1.2 BILLION.

I want my own slice of the ‘made it big’/’got very lucky’ stories so, as a firm believer that the market is still embryonic, I have taken the plunge. I set up Coinbase and Bittrex accounts, Coinbase to buy Bitcoin and Bittrex to convert to alternative coins. I then bought the coin I was talking about in one of my previous articles, ADA just after their ICO. The distributed ledger for ADA is being built by Charles Hoskinson and his team at Cardano/IOHK. The word is that they may have the ‘magic’ formula to build a cryptocurrency and distributed ledger which will help make cryptocurrencies both highly useable in the real world and regulation friendly.

So, I bought circa 20000 coins at about 2p a coin, not a huge investment but enough to make things interesting. Very quickly I am realising that basically what you are investing in is trust in the team building the DLT and promoting the coin. Trusting that they won’t simply give up at some point, trusting that they are smarter than their competitors and that they will build something of value in the future. At the moment, the coin is bumbling along at circa 2p/coin, the hope is that as the developers at IOHK build their platform, promote what they’ve built and get closer to making something of use to the world, during that process more people will want to buy coin and the value will go up. It strikes me that there are plenty of similarities between this and that by investing in shares, you are backing/trusting the people behind the investment, their product and the demand for that product.

If ADA does well over the next couple of years, it could work out very nicely indeed compared with putting that money in a bank account. They may, of course, lose interest and simply give up. It’s all very exciting! My strategy is to invest in a few of them in the coming months and hope that one of my choices rockets in value when they discover some sort of DLT holy grail.

I don’t think I’m the only one finding it exciting, whilst I have been working with exchanges and DLT businesses for the most part this year, I am starting to see more and more interest from Hedge Funds who are starting to allocate assets to the sector, presumably attracted by the wild west nature of the markets and massive volatility of the marketplace. These businesses are also starting to hire developers to work on cryptocurrency trading systems.

The cryptocurrency markets have been under attack from various angles this year, big name bankers have been slamming them, China has banned them, etc. However, they continue their march upwards and continue to gain momentum, even though actual uses for cryptocurrencies are still limited, the people behind them are just getting started and the potential is evident in the value of the overall market; according to Coinmarketcap $164 billion dollars as of October 25th.