At a time when many investors have all but given up on crypto, one contrarian investor, and a venture capitalist no less, is planning to go all-in.
Top venture capital firm Andreessen Horowitz has decided to double down on cryptocurrencies by plonking a $300 million fund into everything crypto--early-stage coins, tokens and later-stage networks like bitcoin and ethereum.
Andreessen is not the first institutional investor in cryptoland. So why is this making news?
There are two reasons, namely:
- the strange timing and, more importantly,
- because the firm has decided to go ultra-long on cryptos
Crypto Hedge Funds
In August 2017, Business Insider ran a story about how 55 hedge funds had taken to crypto like ducks to water, pumping millions of dollars into the industry. The story made waves because institutional investment into the new and rather arcane digital assets was hitherto considered to be almost non-existent.
Luckily for them, the leap into the unknown paid off handsomely. The move by money managers has proven incredibly prescient in hindsight because it happened at the beginning of the meteoric crypto rally that saw coins like Bitcoin post gains of more than 1,000 percent while others like ethereum exceeded gains of 10,000 percent. Related: Why Investors Must Look At Small-Cap Stocks
Funds that got the timing right by getting out before everything suddenly soured definitely made a killing. That’s because the crypto market later tanked with nearly the same zeal that it had risen from its cabalistic existence, losing nearly 70 percent of its value in a matter of months.
The rug was pulled from under the feet of crypto hedge funds, and the bubble begun to deflate. The funds found themselves skating on thin ice after booking hefty losses with a dozen or so even folding.
(Click to enlarge)
Source: CoinMarketCap
The Warren Buffett of Crypto
Andreessen Horowitz’ timing is therefore strange indeed.
But here’s the clincher: The firm has decided to go ultra-long on cryptos by holding its investments for up to 10 years.
Indeed, Chris Dixon, general partner at Andreessen Horowitz, says patience is key to the firm’s crypto strategy.
It’s an all-weather fund, too, buying crypto aggressively and consistently regardless of market conditions. In fact, Dixon says some of the downturns present the best buying opportunities.
And that could earn Andreessen the strange moniker “the Warren Buffett of crypto”. Strange because Buffett himself doesn’t believe in crypto and thinks of them as a bubble that will end in disaster. But it’s the philosophy here that counts. Why? Because Buffett is a stickler for buying undervalued stocks and holding them … forever.
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Hedge funds are supposed to be aggressively managed, meaning lots and lots of shuffling of their holdings. For a hedge fund to buy crypto in a severe market downturn and plan to hold its investments for a decade sounds insane, but can only mean one thing: It’s got lots of faith in the future of the technology and believes there’s value to be found in the industry.
And don’t bet against the firm.
For years, hedge funds have been like the financial market version of the guy that just can’t learn to shoot straight. But suddenly they have started looking like geniuses, outperforming the market by quite some distance in the current year. Multiple trackers of hedge funds are showing a clear trend of outperformance.
If you would like to follow Andreessen’s lead, HOLD 10 Index, the world’s first cryptocurrency index fund, might work for you.
By Alex Kimani for Safehaven.com
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