Multicoin Capital, a cryptocurrency-focused hedge fund which leads 3 to 4-year long-term investments in the cryptocurrency market, has raised millions of dollars from some of the largest venture capital firms in the technology sector, including Andreessen Horowitz.
Advantage of Cryptocurrencies
The hedge fund aims to raise over $250 million from accredited angel investors and major VC firms, to invest in cryptocurrencies within the global market. So far, Multicoin Capital raised over $50 million.
Apart from Andreessen Horowitz partners including Marc Andreessen and Chris Dixon, former PayPal CEO Davic Sacks, Color Genomics co-founder Elad Gil, and Craft Ventures partner Bill Lee invested in the cryptocurrency hedge fund, Multi-coin Capital co-founder Kyle Samani told Fortune.
Samani noted that cryptocurrencies have recently become a legitimate and a rapidly growing asset class, a sentiment that was shared by several executives in the traditional finance sector including JPMorgan strategist Nikolaos Panigirtzoglou, who previously explained that the emergence of futures exchanges could allow bitcoin to compete with gold in the long-term.
“What you’re seeing is the next wave of serious investment coming to an exciting, recently-legitimized asset class,” said Samani, emphasizing that the cryptocurrency market is still at its early phase in terms of adoption, development, liquidity, and infrastructure.
Although the valuation of the cryptocurrency market remains below $0.5 trillion and it is still a relatively small market in comparison to traditional assets like gold, Samani said that cryptocurrencies have an advantage over traditional assets due to its liquidity.
In the cryptocurrency market, any individual trader or investor can freely invest in any cryptocurrency or token without the need for accredition or formal verification. As such, the cryptocurrency market enables anyone to invest freely, providing significant liquidity to both large and small cryptocurrencies or blockchain projects.
“While there are lots of similarities between crypto investing and traditional startup investing, there are many differences. Most obviously, crypto assets become liquid much sooner in their life cycles than traditional private equity. In addition to liquidity, everything in crypto is open source, which requires thinking about investing in a fundamentally different way,” said Samani.
Many major cryptocurrency exchanges such as Binance, OKEx, Huobi, Upbit, and Bithumb are processing over a billion dollars in cryptocurrency trades. Binance, OKEx, and Huobi, three of the largest exchanges in the world, only provide cryptocurrency-to-cryptocurrency support, and still process nearly $1.5 billion worth of trades on a daily basis, a volume that surpasses stock markets in most economies like South Korea.
But, unlike the other 200 cryptocurrency-focused hedge funds that are generally targeting short to mid-term profits and returns, Multicoin Capital is seeking for long-term returns. Given the exponential growth rate of the cryptocurrency market, 3 to 4 years in the cryptocurrency market is comparable to 30 to 40 years in traditional markets, primarily because the cryptocurrency market operates 24/7.
In regards to the long-term growth and adoption of cryptocurrencies, the acknowledgement of the asset class by key venture capital firms and angel investors can be considered as an optimistic sign, especially in a volatile period like this.