Animal Spirits Podcast Starting a Crypto Hedge Fund
Feb 19, 2022
The discussion dives into the world of crypto hedge funds, highlighting the differences from traditional models. Fundraising complexities are unveiled, showcasing institutional investors' hesitance due to market volatility. Risk management strategies for navigating market turbulence are explored, focusing on mitigating drawdowns. The conversation promotes a balanced perspective on crypto investments, emphasizing safety in DeFi and CeFi, while assessing portfolio diversification. Exciting insights on stablecoins and the evolving stance of institutional investors round out the analysis.
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Crypto's Lack of Intrinsic Value
- Crypto assets lack intrinsic value because they are the first globally investable assets.
- This leads to volatile price swings driven by fluctuating future growth assumptions.
Risk Management in Crypto
- Drogen aims for a 30% maximum drawdown in his crypto hedge fund, which is considered massive for traditional funds.
- However, given crypto's volatility and potential gains, he views this as acceptable risk-reward.
Avoiding Rug Pulls
- To avoid rug pulls, read the code and audits of crypto projects.
- Consider the reputation and financial strength of the project's backers.