A new company called Polychain Capital has raised $10 million in capital for a hedge fund made up of cryptocurrencies such as bitcoin. The business, led by former Coinbase employee Olaf Carlson-Wee, believes investors can gain significant returns by investing in digital assets.
Former Coinbase Employee Creates Cryptocurrency Hedge Fund Polychain
Olaf Carlson-Wee was one of Coinbase’s first employees. He launched Polychain, a multi-cryptocurrency investment fund, this past September. According to Forbes, the company’s $10 million in funding was led by venture capital firms Union Square Ventures and Andreessen Horowitz. Brad Burnham, partner at Union Square Ventures, said Carlson-Wee “understands how to look at and evaluate tokens and determine which tokens are most likely to appreciate in value.”
This year digital assets like bitcoin and ether have greatly appreciated in value and Polychain says it is “committed to exceptional returns for investors.” Furthermore, the company’s no-frills website also claims portfolios of blockchain assets are “actively managed.” Currently, the website just has Carlson-Wee’s email for contact about the hedge fund, but not much more detail is displayed. The former head of risk manager for Coinbase said he believes in the current constellation of cryptocurrencies, telling Forbes:
There will be many types of assets codified into the blockchain, and they are all not just going to be on the Bitcoin blockchain — it’s going to be a number of different assets here. And the best way to invest in that is with a diversified portfolio.
Digital Asset Funding Vehicles Will Be in High Demand
Carlson-Wee’s Polychain hedge fund won’t be the first on the block with this type of company. Pantera Capital and three other firms have been offering a bitcoin investment fund for quite some time. Another similar project called Melon, designed by Parity (Ethcore) founder Dr. Gavin Wood will be a decentralized asset management for multiple blockchains. However with big backers such as Andreessen Horowitz and Union Square Ventures Polychain definitely has a jump start. Carlson-Wee explains to author Laura Shin that digital assets will be in high demand.
“For the first time, open source, peer-to-peer protocol developers can monetize their project on a protocol level,” explains Carlson-Wee. “Demand for the tokens increases because you need the tokens to participate in the network. And as that demand increases, because the supply of tokens is scarce and fixed, the price goes up. So it acts sort of like equity in a startup to incentivize the founder and employees, but it’s really monetizing an open source peer-to-peer protocol, not a company.”
Believers in the Network Effect
With the Polychain investment, Andreessen Horowitz continues to show its belief in the cryptocurrency ecosystem. The venture capital firm has injected vast sums of funds into companies like Coinbase, Openbazaar, Github, 21inc, and more blockchain startups. Marc Andreessen also has been an active proponent for Bitcoin, writing his well-known editorial “Why Bitcoin Matters.” Andreessen stated in the New York Times:
Bitcoin is a classic network effect, a positive feedback loop.— Bitcoin shares this network effect property with the telephone system, the web, and popular Internet services like eBay and Facebook.
As particular currency and commodity markets flop this year investors may be interested in these types of portfolios and risk management funds. Polychain seems to think investors will find value in a hedge fund based on cryptocurrency returns and with its recent $10 million injection venture capital firms believe this as well. With the industry creating exchange-traded funds (ETF) and hedge funds based on cryptocurrencies such as Bitcoin— the network effect strengthens.
What do you think about a cryptocurrency hedge fund? Let us know in the comments below.
Images via Shutterstock, Forbes, and Polychain Capital websites.
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