Exclusive Q&A with Zach Hamilton from Airfoil Capital
Why has cryptocurrency experienced such an explosion of popular interest & investment over the past six months? Do you think this will translate into the investment industry?
I think that if traditional investment houses are not keeping up with what is happening, they will be left in the dust. The world is changing in a way that will make it unrecognizable in 5 to 10 years. The internet seemed like a small movement but then became so pervasive that the world can never return to a pre-connected state. Cryptos are not water running over stone and eroding it slowly over time, they are water freezing into the cracks of the traditional financial monolith and cleaving it into a new form.
For asset managers, what differences are there in managing cryptocurrencies vs traditional alternative investments?
Since there are no rule books here, everyone is learning as they go. Many of the same investing thesis of late also apply to the crypto world, mostly the lessons from venture capital and other exponential technology fields like pharma and biotech. While these lessons apply here, things like PE ratios and DCF analysis are laughably outdated. This world has different metrics, but there are still people behind the controls (rather there are people building the parameters) of these networks.
From a more practical standpoint, cryptocurrencies have bypassed the traditional financial stack and do not require the use of middlemen like banks or prime brokers. They are digital bearer bonds and must be secured as such. Unlike physical cash, you can send crypto around the world just as quickly as sending it to the person next to you. Hacking is a major concern, and the borderless nature of the beast does not make things easier. These concerns are a major reason that Airfoil Capital exists.
On an international scale, how will the industry, governments and responsible bodies across the globe move to control and regulate cryptocurrency?
Given the instantly international nature of the crypto world, regulation will always be a topic of wild debate (and speculation). Cryptocurrencies are borderless, it is only the people that own/use them that are bound to lines in the sand. If a large and rich country were to enact harsh laws in the space, everything will move to the next best option, and frankly there are a lot of really great places to go. This is not like building an office building and filling it with FINRA licensed professionals, these are autonomous, decentralized protocols that proliferate based on incentive structures, not government acceptance or support.
Right now it seems that Switzerland is doing the best job when it comes to seeing what crypto really is. This is hardly surprising given its history in sovereign fiance. The regulators are seeing that these are not stocks, bonds, or any other financial instrument from the past.
As you know, TSAM’s community is made up mostly of senior technology & operational professionals in the asset management industry. What is the message you want to get across to these people at the New York summit?
My goal is to help open people’s eyes to the possibilities that exist in the future when it comes to crypto. If I can help people create a new box in their minds rather than trying to fit crypto into what they already know about finance, then I have done my job. I think we are at a turning point in finance, that traditional institutions have gotten too fat and that they will be culled. Some will adapt and innovate, some will be wiped out.
Join Zach and many more industry experts at TSAM New York on the 13th June 2018.
For more information, download the event brochure here www.tsamnewyork.com