
Mike Novogratz Is Set for Comeback With Cryptocurrency Hedge Fund - champagnepapi
https://www.bloomberg.com/news/articles/2017-09-26/mike-novogratz-is-set-for-comeback-with-crytocurrency-hedge-fund
======
josu
This fool thinks he can time the market.

>“I sold at $5,000 or $4,980,” he said. “Then three weeks later I’m trying to
buy it in the low $3,000s. If you’re good at that and you’re a trading junkie,
it’s a lot of fun.”

My guess is that this is not going to end well for him or his fund.

If you want to read a similar story read this twitter feed [0]: it's from a
very confident trader who probably lost around 1-2M. We will probably not know
the exact number because he stopped tweeting.

[0] [https://twitter.com/fomoer](https://twitter.com/fomoer)

~~~
rothbardrand
Timing the market isn't as hard in a sustained bull market, because being
right %50 of the time still results in returns. When Bitcoin makes all time
highs, selling some is an easy strategy, and then when some random news hits
and it drops, or whales start throwing weight around, then you can buy in at a
discount like this guy did.

The article leaves out that it has come back up to $4k right now.

Since so many traders are following stock oriented trading strategies the
market dynamics end up being a lot like stocks with sentiment driving
direction, which is probably not super hard to trade (though I'm not good at
it.)

So much of the stocks value and future depends on regulatory environment and
stocks are located in one jurisdiction... meanwhile bitcoin global.

So as time goes on, any one jurisdiction making scary noises has less effect
on bitcoin.

The drop to $3k was due to china "banning bitcoin" (for like the 8th time this
year) and it was quickly shrugged off... I remember china "banning bitcoin"
back in January taking us from $1,200 to $800.

~~~
csomar
> Timing the market isn't as hard in a sustained bull market, because being
> right %50 of the time still results in returns. When Bitcoin makes all time
> highs, selling some is an easy strategy, and then when some random news hits
> and it drops, or whales start throwing weight around, then you can buy in at
> a discount like this guy did.

This speaks like someone who hasn't traded bitcoin, at least recently. I'll
tell you that the non-stop jump from 900 to 3.000 hit very bad the very best
of traders. That's an event where you lose money even though we are still in a
bull-market. Now think how much you'll lose when the tables turn (bull market
to bear market).

Trading is hard business.

------
cs702
He calls Bitcoin a bubble, and yet, he's launching a new $500 million fund to
BUY Bitcoin -- including $150 million of his own money!

WHY would he be doing this?

Quoting from the OP, here's his answer:

 _" This is going to be the largest bubble of our lifetimes, and so ..
remember, bubbles happen around things that fundamentally change the way we
live. The railroad bubble, railroads really fundamentally changed the way we
live; the Internet bubble changed the way we live. And so, prices are gonna
get way ahead of what they should be. You can make a whole lotta money on the
way up. And we plan on it. At one point you're going to have to sell."_

~~~
empath75
I’m gonna ride this Ponzi scheme all the way to the top!

~~~
cs702
Was the railroad bubble of the 1840's [1] a Ponzi scheme?

Was the dot-com bubble of the late 1990's [2] a Ponzi scheme?

Were the electricity, automobile, aviation, radio, and television bubbles of
the "Roaring 20's" [3] Ponzi schemes?

Just because something is in an asset-price bubble doesn't necessarily mean
it's a Ponzi scheme. Yes, many if not most investors ultimately lost money in
the electricity, automobile, aviation, radio, television, railroad, and dot-
com bubbles, but those bubbles left behind an enormous amount of investment in
infrastructure from which we are benefiting to this day.[4]

[1]
[https://en.wikipedia.org/wiki/Railway_Mania](https://en.wikipedia.org/wiki/Railway_Mania)

[2] [https://en.wikipedia.org/wiki/Dot-
com_bubble](https://en.wikipedia.org/wiki/Dot-com_bubble)

[3]
[https://en.wikipedia.org/wiki/Roaring_Twenties#Economy](https://en.wikipedia.org/wiki/Roaring_Twenties#Economy)

[4] Buffett wrote a great article touching on this in 1999, at the peak of the
dot-com bubble:
[http://archive.fortune.com/magazines/fortune/fortune_archive...](http://archive.fortune.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm)

~~~
optimuspaul
You are comparing cryptocurrencies to highly regulated securities markets. I
don't think that is a fair comparison yet. From the average person
cryptocurrencies look exactly like a Ponzi Scheme. People who got in early are
most likely to make money. Many other could as well. But the majority will not
and if a majority tried to get out we'd find that there is not enough
liquidity in the market to back it. Maybe someday it will be fair to compare
cryptocurrencies to securities, but for now it's is closer to junk bonds or a
ponzi scheme. And I don't think a marketing and branding campaign is what it
needs, it's structure and security.

~~~
gruez
>You are comparing cryptocurrencies to highly regulated securities markets

but SEC wasn't even founded til 1934, which makes that point only apply to the
dotcom bubble.

------
nikcub
> “I sold at $5,000 or $4,980,” he said.

I doubt it. If you follow the Bitcoin price you'll know that a lot of indices
reported the price hit over $5,000 but that was because the Chinese exchanges
were trading at a premium (up to $5,150 on OKCoin) which dragged it up.

It didn't actually hit $5,000 on Coinbase, Bitfinex and Bitstamp - and when it
did trade at high $4900s it was for low volume for a very short period of time

The reason why the price delta between the USD and CNY exchanges is high is
because of how difficult it is to trade between the two (also because of
restrictions on CNY)

So he's either trading on Chinese exchanges and figured that out, or ..

~~~
mrb
It actually surpassed $5k for about 3 hours on CEX.IO
[https://bitcoincharts.com/charts/cexUSD#rg60zig5-minzczsg201...](https://bitcoincharts.com/charts/cexUSD#rg60zig5-minzczsg2017-09-01zeg2017-09-02ztgSzm1g10zm2g25)

------
Blackstone4
Maybe some people here can help answer some questions I have:

1 - Where can you spend Bitcoin?

2 - What percentage of outstanding Bitcoins are used for trade? i.e.
exchanging currency for a good

3 - People have been saying it could be used for illegal activities. I
understand each transaction is recorded in the global public ledger using the
ID. Is it possible to trace who is behind each transaction? Can it be used for
illegal activities? If so what percentage of Bitcoin does this make up?

~~~
VMG
1) Here is a list [https://99bitcoins.com/who-accepts-bitcoins-payment-
companie...](https://99bitcoins.com/who-accepts-bitcoins-payment-companies-
stores-take-bitcoins/) \-- a lot of stores indirectly accept bitcoin via
payment providers like bitpay.com, but I could not find a list.

2) Hard to tell because of (3). But you can approximate it using the exchange
volumes: [https://bitcoinaverage.com/](https://bitcoinaverage.com/)

3) Unless you are doing a targeted search, mapping an individual to one of his
addresses, it is very difficult to run an analysis. This makes it hard to
answer (2). It successfully used for illegal activities.

~~~
Blackstone4
Thank you VMG

On 2) could one strip out speculators from the exchange volumes?

~~~
VMG
My answer is no, simply because even the definition of "speculator" is
unclear.

------
VMG
Gold is a 6000 year old bubble: [https://www.coindesk.com/citi-chief-
economist-bitcoin-closes...](https://www.coindesk.com/citi-chief-economist-
bitcoin-closest-commodity-gold/)

~~~
bhaak
This one might pop if we get profitable asteroid mining.

------
csomar
> “I sold at $5,000 or $4,980,” he said. “Then three weeks later I’m trying to
> buy it in the low $3,000s. If you’re good at that and you’re a trading
> junkie, it’s a lot of fun.”

Why not make your trades public then? You can make them publicly encrypted and
then publish the keys later if you want to brag.

And is he talking about a small trade here? 4980 was the maxima (the tip), so
little money changed hand at that price.

I take any person who says that as a fraudster selling to the ignorant. If you
can make, with persistence, 30% returns in a few days then why raise capital
in the first place?

------
jsnathan
Specifically, he compares compares blockchains to the Internet and railroads:

"It is a bubble. This is going to be the largest bubble of our lifetimes, and
so .. remember, bubbles happen around things that fundamentally change the way
we live. The railroad bubble, railroads really fundamentally changed the way
we live; the Internet bubble changed the way we live. And so, prices are gonna
get way ahead of what they should be. You can make a whole lotta money on the
way up. And we plan on it. At one point you're going to have to sell."

~~~
AznHisoka
everything he says seems fairly obvious but he never seems to answer the tough
question: when do you sell?

~~~
dmichulke
My answer: Take a look at the dotcom bubble, adjust nasdaq marketcap for
inflation (and maybe much more because of ZIRP) and there you have your target
market cap.

~~~
AznHisoka
What's your reasoning behind this? When all the dumb money is in, it's time to
get out?

~~~
dmichulke
Yes, the only question is when the dumb money is in. I guess dotcom is here a
historical precedent.

Since we cannot really know, I will just use that number and gradually sell
around it. Of course that might make me the dumb money but that's a risk I'm
willing to take.

------
jondubois
It's very high risk, but I can imagine the bull case becoming a reality some
day:

Approximately $10.5 trillion US dollars exists today. Some sources claim that
the total value of all fiat currencies in circulation (or storage) in the
world amounts to $75 trillion.

The total market cap of ALL cryptocurrencies today is less than $150 billion.
This means that if cryptocurrencies replace traditional currencies, then you
can expect a 500x increase in the total value of all cryptocurrencies. But
it's not going to all go into Bitcoin; it's going to be spread across millions
(if not billions) of unique cryptocurrencies and new ones are going to rise
and fall all the time (like apps on the app store, except fairer). There will
be exchanges to convert between any cryptocurrency immaginable; they will all
communicate with exchanges via a standard protocol. So any new currency which
implements the protocol will be immediately tradeable on any exchange.

Different groups of people will affiliate themselves with different
cryptocurrencies and this will allow the combined net worth of different
groups of people to float freely on the market based on how much the rest of
society values their labor/output. To get rich, it will just be a matter of
associating with the the right groups of people at the right time (by buying
their currency). It will be the ultimate free market.

~~~
rothbardrand
The thing is, unless you are auditing the code it's hard to know which cryptos
are competent and which are just BS.

On the other hand, since the code is open source, then you can audit the code.

A crypto hedge fund that spends a lot of money actually auditing code might
have great returns.

------
m-p-3
It could very well be a bubble, but I never put more than I am willing to
lose.

------
timthelion
I think that the idea is that the total volume is low enough that this person
thinks they can manipulate the price. They say "it's a bubble, it's going to
pop" and then they sell $30million in obfuscated coins. Everyone goes "IT'S
POPPING!" and they sell, and then he buys $470million in coins.

------
wslh
It is also good to try to have a balanced view and separate signal from noise.
Chris Burniske published a few days ago an article about cryptoasset
valuations trying to start a serious framework for analyzing cryptoassets [1].

Beyond the valuation, the innovation behind Bitcoin and few others make sense
taking into account scaling issues and security thresholds.

Sharing here [2] a work in progress about new insights in the field (e.g.
Spectre).

[1] [https://medium.com/@cburniske/cryptoasset-valuations-
ac83479...](https://medium.com/@cburniske/cryptoasset-valuations-ac83479ffca7)

[2]
[https://docs.google.com/document/d/1VfvfAA2v7EhAaxKmw95GJ0pv...](https://docs.google.com/document/d/1VfvfAA2v7EhAaxKmw95GJ0pv6SYdrcHxmGd7KwUL4Es/edit?usp=drivesdk)

~~~
rothbardrand
Be vary wary of the "peer review" status in that spreadsheet. Academic peer
review is a lot different from a code audit, and at least one of the projects
you have listed engaged in a lot of, shall we say, less than secure practices
in implementation, like embarrassingly insecure.

There's a world of difference between academic peer review and adversarial
code review.

~~~
wslh
> Academic peer review is a lot different from a code audit, and at least one
> of the projects you have listed engaged in a lot of, shall we say, less than
> secure practices in implementation, like embarrassingly insecure.

Which project are you referring to? If you are referring to IOTA it is a
preprint.

Also here we put a new link to the doc:
[https://docs.google.com/document/d/1J8hehbnZWzcIUMQcxMiGbjz8...](https://docs.google.com/document/d/1J8hehbnZWzcIUMQcxMiGbjz86wDu3zDFF7UtkR0XjGE/)

------
omellet
Most people think it's a bubble, and nobody thinks they're the greater fool.

------
mrb
He is a billionaire who puts his money where his mouth is: he revealed in
April he had $100 million(!)'s worth of Bitcoin & Ethereum.
[http://money.cnn.com/2017/04/20/investing/mike-novogratz-
bet...](http://money.cnn.com/2017/04/20/investing/mike-novogratz-bets-big-on-
bitcoin-ether-blockchain/index.html) Went up 3-5× since then...

------
thinkMOAR
If a tree falls.. i mean the other well known saying,

"if a bubble doesn't burst while you are in it (invested and cashed out), was
it really a bubble?"

~~~
saalweachter
I'm really starting to respect it a lot more as a bubble now that most people
have stopped trying to pretend it's a viable currency/transaction processing
system.

It's really, like, the platonic ideal of a bubble, perfect for separating
fools from their money: slow growing, with no clear limit in site, but
volatile, and decoupled from reality. It's beautiful, really.

~~~
rothbardrand
Bitcoin is many things, and the most important thing is it's a currency
outside of the control of governments. Right now that's new enough that it's
primary value proposition is anti-inflation (in venezuela) and "digital gold"
in much of the world. Is there no legitimate value to letting chinese people
move money?

Also, between SegWit, Lightning Network and side chains, the scalability is
going to be nearly unlimited in about two years, so the idea that it's not a
"viable transaction processing system" seems a bit silly. In fact it works
now, globally, without serious problems.

------
rothbardrand
Ultimately what makes for a successful cryptocurrency is security and network
effects.

Now security not just includes the quality of the cryptography but the quality
of the network, and the design of the currency to allow it to be used
reliably.

This factor is all about engineering. And the thing about cryptocurrencies is
that they are so novel and so new that there are a really small number of good
cryptocurrency engineers. I've worked with a lot of second raters (I'm maybe a
third rater myself) and talked to the first rate people. This is not a skill
people will be getting with a class or two at a MOOC. (Or I wouldn't be a 3rd
rater)

On both measures: Security and Network Effects bitcoin is the king.

The second most popular is Ethereum which is starting to get a lot of holders
but seems to be constantly engineering its way out of disaster (the blockchain
is already bigger than bitcoins and it's growing faster and new code is being
thrown in all the time.)

Move fast and break things makes sense for facebook- they can fix any problems
trivially. This is not the case for blockchain systems and thus the risk for
ethereum is pretty high. To their credit they have been able to avoid
catastrophe so far, but it's a lot less safe in this regard than bitcoin. (And
theres some fundamental problems with Proof of Stake that may be exploited
when Ethereum goes to that mechanism.)

Right now there's money to be made trading between these alternatives to
bitcoin and bitcoin, but that's mostly trading on hype, not utility.

Bitcoin itself isn't even yet having its value follow utility, though it's
adoption in situations like Venezuela is starting to prove some of that
utility (and here again Ethereum has done good by being GPU mineable,
something you can do in probably any country, unlike Bitcoin which requires
expensive and mostly-single sourced ASICs)

I don't see where Crypto hedge funds have any advantage. They can't engage in
the kind of market manipulation or derivatives trading that typical hedge
funds seem to make their money with.

------
pmorici
Title is not accurate, what he actually says is that it will be not that it is
currently.

Also lots of errors here like mistaking ICO for Internet Coin Offering instead
of Initial Coin Offering.

