Investment

A family office bets big on the blockchain rather than cryptocurrencies

A family office owned by hedge fund billionaire Steven Cohen has spent the summer betting on blockchain, happy to leave other wealthy investors to speculate on bitcoin.

Blockchain is the electronic ledger system that records online transactions without needing an intermediary. It lies at the heart of digital non-fungible tokens, unique to their owners, and cryptocurrencies.

Cohen is a backer of Digital, which invests in virtual reality opportunities known as the metaverse, which create digital worlds for its clients. Each virtual space goes on to offer service vendors access to its followers including marketing opportunities, as Coca Cola has discovered. 

Digital has gone on to lead a $50 million investment round for Recur, which puts together unique NFT projects for sports firms. Recur believes the metaverse will be a natural home for the display, and trading, of its products.

Other Recur investors include the Winklevoss twins, backers to a stream of crypto ventures; Gary Vaynerchuk, a US entrepreneur born in Belarus, and pop singer Jason Derulo. Recur has set out to develop royalty streams for stars, and their products, digitally captured on their NFTs. Its platform can create a marketplace where stars and clubs generate royalties forever. 

Transactions can be easily traced and value can be extracted through sales of unique NFTs on the secondary market. Recur also wants to extend its service to colleges, where the Winklevoss brothers saw the potential for Facebook, before Mark Zuckerberg seized control.

Cohen would be equally aware of the potential in the sports market after buying 97% control of the New York Mets baseball team in 2020. 

He initially hit fame with SAC Capital Advisors, which took its name from his initials. Its assets at inception were $25 million, hitting $16 billion at its peak through a variety of investment styles. 

On occasions, SAC became the world’s best performing hedge fund, generating 30% a year, net of a 3% base fee and 50% of performance. It reached a settlement with the SEC in 2013, relating to alleged insider trading by two employees. A fine of $1.8 billion was approved by the court the following year.

Cohen reopened his hedge fund, branded Point72, in 2018. Part of a family enterprise, it now runs $22 billion using strategies relating to long/short, systematic, private equity and venture capital investing. Cohen Private Ventures invests in private assets and structured securities.

Cohen wants Point72 to stay clean: “To be the industry’s premier asset management firm through delivering superior risk-adjusted returns, adhering to the highest ethical standards and offering the greatest opportunities to the industry’s brightest talent.”

In 2018, Cohen Private Ventures invested in crypto hedge fund Autonomous Partners. Following a long wait, Point72 led a fundraiser this August for crypto analytics firm Messari, also backed by the Winklevoss twins. Other investors include Tom Glocer, former chief executive of Thomson Reuters, Kraken, the crypto platform, and Coinbase Ventures.

In September, Cohen invested personally in Radkl, a newly established digital trader, started by global market maker GTS. In a statement, Cohen said: “As more professional investors enter this space, there’s a need for an institutional player like Radkl that engages in large digital asset transactions. This is a natural extension of GTS’ technology focus, and I am excited about the opportunity to support them in this initiative.”

Volatility in the crypto market has brought more opportunities to win, or lose, money compared to an equity market drowned by excess liquidity. 

The bitcoin market has been jolted by China’s decision to ban its trading to ease the path for its digital currency.  Bhutan’s central bank has confirmed the testing of its own digital currency, with advice from Ripple. Bitcoin suffered a 10% drop in September, its worst performance since May,

But bitcoin bulls are holding for the long-term. In June, hedge fund manager Paul Tudor Jones said bitcoin still excited him. He told CNBC: “I like bitcoin as a portfolio diversifier. The only thing I know for certain, I want 5% in gold, 5% in bitcoin, 5% in cash, 5% in commodities. 

His rival Stanley Druckenmiller said he’d been told no one ever sold it: “These kids on the West Coast are already worth more than I am, and they’re going to be making a lot more than me in the future.”

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