In Episode 34 of Hidden Forces, Demetri Kofinas speaks with Brian Kelly, CEO of BKCM LLC, a digital asset investment firm. He is an experienced Global Macro investor with over twenty-five years’ experience in financial markets and a CNBC contributor who appears regularly on Fast Money.
Our most recent episodes with Chris Burniske on modeling cryptoassets and with Ari Paul on cryptocurrency trading methodologies introduced two foundational frameworks to our audience. This week's episode with Brian Kelly affords our audience the opportunity to explore both of these perspectives (theory and execution) in a single conversation. Brian Kelly is uniquely qualified to talk about the financial side of cryptocurrencies, but he also provides valuable perspective on how the media is covering this space.
Brian begins his conversation with Demetri by recounting his introductory experience to bitcoin, how he made his first investments, and what he learned in the year he wrote his book “The Bitcoin Big Bang.” The two explore familiar topics like the problem of scalability, exchange and regulatory risk, cash-settled futures and ETF’s, and how bitcoin may fare to gold during a systemic financial crisis. Is there any way to measure the intrinsic value of a given cryptocurrency? Can permissioned blockchains compete with public ledgers, or will cryptocurrencies come to dominate the future of software? Besides bitcoin and Ethereum, what are some of the more interesting cryptocurrency investment opportunities out there? Brian and Demetri also cover the recent spike in financial volatility amid this rising interest rate environment. Lastly, they consider how the rise of systemic trading strategies and passive investment vehicles like ETFs may accelerate (or not) a future market downturn.
Producer & Host: Demetri Kofinas
Editor & Engineer: Stylianos Nicolaou
Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod
In Episode 33 of Hidden Forces, Demetri Kofinas speaks with Bill Browder about how his wealth was plundered by Russian oligarchs and placed in the hands of Vladimir Putin.
This is the story of Bill Browder and the end of glasnost. It stands as a microcosm of how the USSR attempted, and failed, to reform itself. However, in order to truly tell the tale, we must begin with another man: Mikhail Gorbachev.
Mikhail Gorbachev came to the stage at the end of the 1980s with a policy of glasnost, which can best be translated and explained in English as “openness.” Practically speaking, the policy was focused on ending the nation’s endemic corruption by making the government transparent. Or at least, by making the government a little more transparent. Gorbachev hoped that such a policy would thwart the schemes of the bureaucrats who enjoyed complete control of the economy and redistribute power more evenly. Unlike his predecessors, Gorbachev also had a far stronger focus on noninterference.
Ultimately, these policies led to the thawing of the Cold War, the fall of the Berlin Wall, and the decline of the role of the Communist Party in government. These are also the policies that led to the dissolution of the Soviet Union. As a result, saying that Gorbachev changed politics in Russia would be a dramatic understatement. By the time he left office, he’d revolutionized global power dynamics.
However, the promises of openness and noninterference quickly died in the Russia state and reform was never realized. Instead, Gorbachev’s destabilization of previously entrenched power structures quickly led to the traumatic redistribution of wealth into the hands of a tiny kleptocracy.
This is where Bill Browder enters the story, and where the tale of the plundering of Russian industries and resources truly begins.
Bill Browder is the founder and CEO of Hermitage Capital Management, which was the largest foreign investor in Russia until 2005. That year, he was refused entry into the country and had $4.5bn in assets liquidated. The reason? According to Browder, the government was attempting to punish him for exposing corrupt practices.
Then, in 2009, his lawyer, Sergei Magnitsky, died in prison after he uncovered a $230 million fraud committed by officials in the Russian government. That is was when Bill Browder went to war.
Over the last decade, he has been leading a campaign to expose, and ultimately end, Russia’s endemic corruption and excessive human rights abuses. His work led to the passage of the "Magnitsky Act" in the United States and, since that time, many countries have passed similar legislation. The work also made him an enemy of Vladimir Putin and the Russian state, which has issued several warrants and placed him on Interpol's arrest list.
Today, Bill Browder joins host Demetri Kofinas to tell his story and discuss what his tale—a story of high finance, corruption, and murder—portends for the future of this powerful nation.
Producer & Host: Demetri Kofinas
Editor & Engineer: Stylianos Nicolaou
Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod
In Episode 32 of Hidden Forces, Demetri Kofinas speaks with Ari Paul about the inner workings of hedge funds focused exclusively on the cryptocurrency space.
Over the course of the last year, cryptocurrency has dominated our society. The price of the most popular digital currencies surged, increasing in value by well over 1000% in a matter of weeks. We saw similar rises in initial coin offerings, with the number of token offerings increasing from just seven a month in January 2017 to more than forty a month by the end of the year.
This crypto euphoria fueled the formation of several cryptocurrency hedge funds which, according to their various founders, aim to bring the professional trading and portfolio management of Wall Street to the emerging class of digital asset. Although this work promises to open the crypto space to an entirely new class of traders, there are many questions regarding how these funds work and how reliable they are. For example, how are crypto fund managers managing risk? What sorts of benchmarks are crypto funds using in order to measure performance? And how does a cryptocurrency investor seek alpha in an already uncorrelated market? To answer these questions, and help shed some light on the emerging world of crypto hedge funds, we turned to Ari Paul.
As a portfolio manager who oversaw risk at the University of Chicago’s endowment investment office and the Chief Investment Officer at BlockTower Capital- a leading crypto hedge fund that raised over $140 Million in 2017 - Ari Paul is uniquely qualified to discuss the most interesting and creative investment opportunities for making money in cryptocurrencies. His positioning also means that he is intimately familiar with many of the risk factors that populate this new and fledgling market.
Over the course of the discussion, Ari Paul speaks with host Demetri Kofinas about the skepticism surrounding market values, how we can protect ourselves from counterparty and exchange risk, and how hedge funds like BlockTower Capital are making it easier for someone who may not be intimately familiar with blockchain technologies or the inner working of specific cryptocurrencies, participate in this new digital economy.
Demetri also asks Ari what the benchmarks for crypto funds like Blocktower are and how they measure performance. The challenge in the cryptocurrency space, according to Paul, Is that there are really three benchmarks: bitcoin, cryptocurrencies in general, as well as the broader equity markets. Seeking Alpha in an already uncorrelated asset class, therefore, presents a slew of new risk factors that aren’t present for traditional hedge fund managers. Ari Paul also gives his opinion on how the flood of institutional capital might alter these correlations, what a consolidation in cryptocurrencies might look like, and if we are verging near a collapse in valuations.
The two also take a look at cash-settled futures markets, consider the use of put and call options, and explore ways in which investors can better protect themselves from counterparty and exchange risk. Finally, they examine some of the most interesting and creative investment opportunities for making money in cryptocurrencies and what the average investor can do in order to take advantage of them.
Producer & Host: Demetri Kofinas
Editor & Engineer: Stylianos Nicolaou
Join the conversation at @hiddenforcespod