Olaf Carlson-Wee, the first employee at venture-backed bitcoin exchange Coinbase, has departed as head of risk and product manager to focus on a new digital currency hedge fund, dubbed Polychain Capital.
While the firm does not yet have investors or even its own website, Carlson-Wee believes that his vision for Polychain Capital will be enough to turn it into one that generates significant returns for those who invest, given that the fund plans to invest solely in cryptocurrencies and other blockchain-based tokens.
In interview, Carlson-Wee asserted that, owing to the poor returns shown by VCs so far in the industry, investors are better off investing in bitcoin, ethereum, steem, as well as projects like The DAO.
Carlson-Wee told CoinDesk:
âMost of the hackers I know have made 50x returns and theyâre not VCs. I think weâre entering a new model, where people who will be rewarded are the token holders themselves. Youâre supporting the protocol, not a company.â
That said, Carlson-Wee believes heâs identified three reasons why large investors arenât already active in digital currency markets.
For one, he noted that itâs a difficult and financially dangerous process, given that they trade on rapidly changing markets that are open for business 24 hours a day. Sometimes, he said, large investors simply canât jump into the fray due to legal reasons.
âIf youâre a VC fund, and if you have limited partners, you canât buy cryptocurrencies, and its difficult to keep on whatâs going on. You find out by forum announcements and have to participate in some weird pre-sales,â he said.
The solution, according to Carlson-Wee, is that Polychain Capital will create an actively managed portfolio of blockchain-based assets, something he argued makes sense for investors who believe broadly in blockchain, beyond simply the major digital currencies.
Carlson-Wee said:
âIf you invest into the hedge fund, youâre getting access to this tech, but youâre diversified across risk. No matter which tech emerges, Iâm capturing gains the whole way.â
Founded in 2012, Coinbase is one of the largest and earliest bitcoin startups, having raised $117m in venture capital across five funding rounds. So, why leave Coinbase? After three-and-a-half years, Carlson-Wee said he was ready for a change.
Carlson-Wee said that he prefers to work in a small environment, and that he, perhaps, doesnât function best in places with âprotocols and people and communicationâ.
âI think, fundamentally, I do better in a very small entrepreneurial environment,â he said.
To start, Carlson-Weeâs team will be small, in that heâll be the only employee, outsourcing legal work to attorneys. Itâs notable also that Carlson-Weeâs first professional job was at Coinbase, and that he hasnât worked for another company.
That said, Carlson-Wee said he isnât deterred by the difficulty of navigating a new environment. Plus, he argued that what he lacks in experiences, he makes up for in deep subject-matter expertise.
âI have the core things that matter a deep knowledge of crypto protocols, and whatâs going to do well and whatâs not going to do well,â he said.
But Carlson-Wee isnât alone in offering a digital currency-focused hedge fund. Larger industry players like Pantera Capital and Crypto Currency Fund, for example, have been offering the service for years.
The difference with Polychain Capital, according to Carlson-Wee, lies in his vision for the future, and how he intends to position investors to capture earnings created through developments in the blockchain industry.
He noted that this thesis is in line with industry trends, and that today, more and more people are beginning to believe that there will be more than one blockchain in the future.
âI saw this emerging and I think the really interesting stuff isnât happening on the bitcoin blockchain, itâs happening on ethereum and with different blockchains,â he said.
In particular, Carlson-Wee believes ethereumâs digital currency, ether, as well as the digital currencies that could one day be created on the platform to represent decentralized applications, will be a significant area of development going forward.
He concluded:
âThe big returns and the best way to invest will be in the tokens themselves.â
Image via Office Snapshots
