Solid insight from a conversation with a fiat hedge fund manager:
"Off the record discussion I had with someone I know who’s deep in the private equity and hedge fund world - this was before Saturday's downturn. Here's what he said about cryptocurrency:
- They (institutional money) are very interested in the space. They’re watching it closely and believe in the tech long term.
- They are not interested in getting involved in the near future. Risk profile is too high for most.
- They are not interested in playing in markets where they do not have a disproportionate advantage. The idea that miners and “early” crypto peeps own so much and thus have leverage is not OK with them.
This is when things got interesting, In so many words, he told me:
- When top finance guys see a huge opportunity, they rarely wait. They control it. For them, the opportunity in crypto would be for the entire thing to crash so that they can buy in at levels that make sense for them. They are (as he put it) “talking to a lot of people about what would make this crash.”
Between the lines I take this to mean these guys are actively looking at ways to increase fear as much as possible (media, underground whales, etc). They won’t put institutional money in but they will start to put certain parts of their fund in as a true hedge, including a lot of their own personal funds. Example (can't prove this) would be WSJ got some pressure from banks to push that Gdax flash crash headline last week.
- These funds look at the current coin ecosystem as a test bed to build their own private chains. There is no way they’d ever use the same Ethereum or Ether based blockchain for their own use. “We’re not in the business of making other people rich”
Instead, they’d leverage the Ethereum tech to create a private blockchain that they fund with their own money, then allow investors to buy into the fund itself.
This would come in the form of “The Goldman Sachs XL Fund” which is fueled by “GoldmanCoin” which is powered by the Ethereum platform (not Ether, more like a private version of Ethereum classic). Then package that, sell it and ride the popularity of the tech. They also offer benefits of low transaction fees for high net worth ppl who do biz internationally. Contracts, options, etc. Same is true for VisaCoin or AmexCoin or whatever else.
- They are going to start picking off developers with enormous bonus and salary offerings. Like $5M + 3% coin returns yearly. They want to do this not only to get the talent but also to undermine existing coins.
This will be the true test for the fundamentalists — the finance guys start draining the wealth by depressing prices, then offer a HUGE life raft for the OG developers to come build something privately.
In terms of the global adoption, he said they’re seeing it more as an asset class than a currency. The regulation piece is just too big to overcome and there will be a crackdown over the next 2 years. He also said a lot of the privacy focused coins (XMR, ZCASH, etc) are interesting but in an off the books type of way (think Panama Papers 3.0)
Now, this is only one guy but he moves about $100M a day in fiat so I trust his judgment. I also don't think he fully gets the entire ecosystem so he may end up being out of a job in 5 years :).
Time will tell. Good luck out there :)
ps: feel free to comment & start a heated argument!