CASHING IN ON CRYPTO CRAZE,
HARVARD ENTREPRENEURS LOOK TO CASH IN
In the 1970s, Bill Gates and Steve Ballmer revolutionized operating system software. Thirty years later, Mark Zuckerberg helped pioneer social networking. So what’s the latest generation of Harvard tech entrepreneurs up to? Looking to cash in on cryptocurrency, of course. Sign of the times.
Bushra Hamid, the 19-year-old daughter of Syrian immigrants, has teamed up with three schoolmates to form Plympton Capital, a hedge fund for investing in digital currencies. Hamid says they aim to launch in six to eight weeks, starting with US$1 million. Plympton, named for a street in Cambridge, Mass., has already raised US$700,000 from friends and family.
“We don’t necessarily know a lot,” when it comes to the ins and outs of Wall Street, Hamid said, but when it comes to crypto, “they have full trust in us.”
While many tech-savvy individual investors have long dabbled in cryptocurrencies, funds became interested in the last few years. About 226 have opened so far, most of them within the past year, managing as much as US$5 billion in capital, according to Autonomous Research.
Current Plympton investors say the team has what it takes to succeed.
“Their method is what’s appealing,” said one, Adnan Khan, a physician in Austin, Texas. “They have a smart approach with a proven track record. And I personally know Bushra’s ability to focus with meticulous attention.”
Bitcoin, the bellwether for the entire market, has retreated from last year’s heights, sending the crypto fund returns down 48 per cent in the first quarter, according to the Eurekahedge Crypto-Currency Hedge Fund Index.
Many funds aren’t expected to survive for long, and some have already folded. In spite of those setbacks, more funds have opened, some helmed by people in their 20s, according to Remy Astie, chief executive officer of Citadelle, which helps set them up. Astie himself is 24.
The Plympton group is banking on the youth movement. A recent online survey of about 2,000 adults conducted by Harris Poll for Blockchain Capital showed that 4 per cent of millennials — people 18 to 34 years old — have owned bitcoin, twice the rate of the general population. And 16 per cent of millennials said they plan to buy Bitcoin in the next five years.
“Some people might see our age, and see this as a new growing space that’s largely driven by the millennials,” Junaid Zubair, another Plympton founder, said. “That allows for a high sense of liability but also passion and interest. There we might have an advantage.”
Plympton’s plan is to deploy technical analysis, arbitrage opportunities, portfolio optimization, and machine learning to find the right investments, Zubair said. He declined to provide more specifics.
The quartet began meeting to discuss cryptocurrencies last year, when they each invested in coins independently. Hamid said that last fall she started the Harvard Undergraduate Blockchain Group, in which more than 300 students have shown an interest. Hamid won’t say how much she made on crypto, but a friend was impressed enough with the returns to spur her to action.
“He was instantly, instantly intrigued,” she said. “He said, ‘Start something and I’ll invest.’ I realized, ‘Why not?’ ”
To get started, Hamid reached out to lawyer John Lore, who says he has helped set up more than 30 crypto hedge funds.
“Emerging cryptocurrency funds see this an opportunistic time to start up the infrastructure to set up a fund,” according to Lore, who said he gets about six or eight inquiries daily from aspiring crypto fund managers. “What that means is that at least fund managers are very bullish on the longterm aspects of cryptocurrency in varied investment strategies.”
Lore is working with Hamid pro bono. The two also plan to launch the Global Center for Investment Fund Studies, to help new fund managers raise capital, at Harvard this month. Setting up a fund can involve filing with the Securities and Exchange Commission, as well as finding a fund administrator and, potentially, a custodian.
It costs a lot to run a fund, so most need to be targeting US$25 million to US$50 million, Lex Sokolin, global director of fintech strategy at Autonomous Research, said in an email. Still, he said, Plympton’s founders may enjoy a “generational advantage.”
“If crypto is a millennial or Gen Z game, then knowing how to be foolish in the same ways as everyone else is valuable — it allows you to benefit from reflexivity in the markets,” he said. At the same time, their inexperience may hurt them, he added.
“If it’s not grounded in reality and compliance, the project will get eaten up by the increasingly sophisticated competition,” Sokolin said.
BULLISH ON THE LONG-TERM ASPECTS OF CRYPTOCURRENCY.