Teens are now setting up crypto hedge funds despite not having much of a clue as to what they’re doing. And they don’t seem to have trouble finding capital, either.
If you are in the process of trying to gauge whether or not the world of crypto is achieving new highs in bubble status, then look no further than today’s perfunctory Bloomberg article on the crypto world.
Our daily dose of crypto “must have” news comes in the form of an article, published Friday, that details several Harvard undergrad students who woke up one morning and decided they wanted to start a crypto hedge fund. Bloomberg reported,
Bushra Hamid, the 19-year-old daughter of Syrian immigrants, has teamed up with three schoolmates to form Plympton Capital, a hedge fund for investing in digital currencies. Hamid says they aim to launch in six to eight weeks, starting with $1 million. Plympton, named for a street in Cambridge, Massachusetts, has already raised $700,000 from friends and family.
And to give you some indication as to exactly how ready people are to throw money at crypto right now, the article states that they were able to raise $700,000 million from family and friends despite the fact that they may have no clue as to what they are doing:
“We don’t necessarily know a lot, but they have full trust in us,” Hamid said.
Friends – rather, investors – in the fund seem to be a little light on the “due diligence” angle, investing because founder Hamid had one run of success with cryptos:
The quartet began meeting to discuss cryptocurrencies last year, when they each invested in coins independently. Hamid said that last fall she started the Harvard Undergraduate Blockchain Group, in which more than 300 students have shown an interest. Hamid won’t say how much she made on crypto, but a friend was impressed enough with the returns to spur her to action.
“He was instantly, instantly intrigued,” she said. “He said, ‘Start something and I’ll invest.’
The article continues:
While many tech-savvy individual investors have long dabbled in cryptocurrencies, funds became interested in the last few years. About 226 have opened so far, most of them within the last year, managing as much as $5 billion in capital, according to Autonomous Research LLP.
Bitcoin, the bellwether for the entire market, has retreated from last year’s heights, sending the crypto fund returns down 48 percent in the first quarter, according to the Eurekahedge Crypto-Currency Hedge Fund Index.
The article states that they are banking on people their age – and as well as strategies like “technical analysis” to find the right investments:
The Plympton group is banking on the youth movement. A recent online survey of about 2,000 adults conducted by Harris Poll for Blockchain Capital showed that 4 percent of millennials — people 18 to 34 years old — have owned Bitcoin, twice the rate of the general population. And 16 percent of millennials said they plan to buy Bitcoin in the next five years.
“Some people might see our age, and see this is a new growing space that’s largely driven by the millennials,” Junaid Zubair, another Plympton founder, said. “That allows for a high sense of liability but also passion and interest. There we might have an advantage.”
Plympton’s plan is to deploy technical analysis, arbitrage opportunities, portfolio optimization, and machine learning to find the right investments, Zubair said. He declined to provide more specifics.
Good luck with that. The formation of this fund comes at the height of the crypto adoption boom and at a time where countries are the furthest along with they’ve ever been in trying to regulate cryptos and initial coin offerings.
These teenagers have anointed themselves as experts due to one of them simply buying and holding cryptos in ostensibly benefiting from one ride up. However, now that crypto adoption has reached what seems like someone of a slow down, it’s going to take more than just being lucky or buying and holding to make consistent returns in the crypto space.
We wrote yesterday about the only types of funds making money in crypto right now: market makers, volatility experts and those with net neutral exposure. Bloomberg reported on Thursday:
Funds specializing in virtual currency market making and arbitrage strategies delivered first-quarter gains even as their mostly bullish peers lost 40 percent on average. That’s a big reversal from last year, when digital assets soared and market-making funds lagged far behind their long-biased counterparts.
Pivot Digital Trading-2, managed by Hong Kong-based Amber AI Group, generated some of the biggest gains among cryptocurrency funds that avoid directional bets. It rose 4.3 percent in March to bring its first-quarter return to 30 percent, according to the firm. Market Neutral Liquidity SP-Institutional, domiciled in the Cayman Islands, earned 5.6 percent in the first quarter, said Cedric Jeanson of BitSpread Group, investment adviser to the portfolio.
The man behind the curtain continues to get his take. The increased volume that comes with crypto’s plunge may not be great for traditional “buy-and-hold“ crypto funds or retail investors who only have the means to hold long, but that did not stop market makers, net neutral funds and volatility bettors from cashing in. The article continued:
The results suggest some managers are finding ways to profit from wild swings in cryptocurrencies without having to predict whether they will rise or fall. Such tactics may appeal to investors who want exposure to cryptocurrencies without their extreme volatility.
Here’s a full list of funds that weathered the storm and the methods they used, courtesy of Bloomberg:
We’re not sure how fund managers who don’t necessarily “know a lot” will be able to engage in these types of strategies, especially if their experience is likely just buying and holding in a Coinbase account.
Whether or not these Harvard students understand that the only people making money in cryptos right now are those with net neutral exposure where those making a market remains to be seen. But, the fact that there are four partners here, combined with the timing with which they decided to start this fund, has us believing this might be not only the first, but also the last time, we hear about them.
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