Question Everything

Want to make money in the crazy, opaque, inefficien­t crypto market? Start by challengin­g every assumption, every nugget of news, every piece of social-media wisdom.

- By Jeff Kauflin

Want to make money in the crypto market? Challenge every assumption.

Sitting side-by-side in a trendy Manhattan cafe where a glass of cold-pressed pineapple-and-carrot juice costs $9, the 29-yearold cofounders of cryptocurr­ency investment firm Multicoin Capital are ticking off the digital coins they’re shorting. They stand to make millions if the virtual coins tank in value. “Two years from now, zcash is worth zero,” says Kyle Samani of the threeyear-old privacy-focused cryptocurr­ency. Currently, zcash trades for $66.

Research suggests that few of zcash’s users are taking advantage of its core privacy features. Even worse, other cryptocurr­ency platforms such as ethereum are copying zcash’s privacy technology. A zcash spokespers­on counters, “If you want a private medium of exchange, there is nothing else like it.”

Samani’s cofounder, Tushar Jain, is eager to finger another popular cryptocurr­ency the duo thinks is worthless. “We’ve been publicly short XRP,” he says, referring to the coin used by San Francisco company Ripple to speed up interbank transactio­ns.

From offices overlookin­g Austin, Texas’ Lady Bird Lake, they manage a $100 million crypto hedge fund backed by venture capitalist­s including Marc Andreessen and Fred Wilson’s Union Square Ventures. Multicoin concentrat­es its bets—both long and short—in 11 publicly traded cryptocurr­encies. It also owns stakes in 20 private crypto startups.

In a market where disclosure­s are optional and hype and momentum play an outsize role in pricing, the pair uses a combinatio­n of data analysis and crowdsourc­ed research to inform trades. Above all, Samani and Jain have thrived because they question every tidbit of informatio­n they receive. “In the crypto community, these things are religious in some ways. They keep telling you, ‘Believe, believe, believe,’ forever,” Samani says. “We never take it for granted that what’s being said is accurate.” This skeptical approach has been a big winner. According to those familiar with Multicoin’s results, its fund has returned 143% before fees over the last two years.

Jain was born in India and grew up in Astoria, Queens. His parents run a clothing store on Manhattan’s

Lower East Side. Samani grew up in a wellto-do Austin neighborho­od. The two met in 2008 at NYU, where they studied finance and became best friends despite vastly different personalit­ies. Wilson says the hard-charging Samani “can be a little controvers­ial and aggressive.” Jain is reserved and quiet.

Upon graduating in 2012, both worked at Samani’s father’s medical-records company but ultimately left to form their own startups—Samani’s made apps for the ill-fated Google Glass wearable-computer venture; Jain’s created a data business that helped doctors find patients for medical trials. But in mid-2016 the two immersed themselves in learning about blockchain. They joined forces to launch Multicoin in May 2017 as the buying frenzy began. Almost immediatel­y they raised $2.5 million from angel investors. Their portfolio, long on highfliers like ether, “0x” and factom, doubled by the end of 2017.

In addition to making noise on social media—Samani now has 36,000 Twitter followers—the pair began publishing long technical pieces, including one detailing how cryptocurr­encies designed solely to pay for a specific product weren’t worth investing in. “Sometimes we get responses from people that are 1,000-word essays,” Jain says, referring to the insider feedback their posts elicit. “We have a full-time team of 14, but it can feel like an investment team of 50.”

Multicoin’s blog posts also serve as advertisem­ents for new investors and for entreprene­urs seeking funding. By July 2018, Multicoin had raised a combined $70 million from David Sacks (a member of the so-called “PayPal Mafia”), Wilson and other investors. The year was a terrible one for cryptocurr­encies, with bitcoin falling 74%. Multicoin’s losses were limited to 33% because of successful shorts of litecoin, XRP and ethereum classic.

In April 2019, Multicoin made one of its boldest bets: It wagered nearly 15% of its portfolio on Binance, one of the world’s largest crypto exchang

 ??  ?? Multicoin Capital’s founders and best friends Tushar Jain (left) and Kyle Samani. To cope with the stress of crypto markets, Jain meditates; Samani takes
spin classes.
Multicoin Capital’s founders and best friends Tushar Jain (left) and Kyle Samani. To cope with the stress of crypto markets, Jain meditates; Samani takes spin classes.

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