Growing trend of venture capital investments in crypto currencies

“The investor must wait until a liquidity event. The emergence of digital currencies is a black swan event with extreme upside potential for investors. Bitcoin is currently the clear leader of this space, but there are many scenarios under which other AltCoins Asset Class could capture a significant portion of the digital currency economy.” – MetaStable Hedge Fund(an investment fund for Venture Capitals and High Net Worth Individuals). Since its launch in September 2014, MetaStable has delivered such eye-popping performance with profits of more than 500%

One of the most important indicators an investment asset class is valuable and profitable lies in the growing trend of venture capital (VC) firms’ massive capital investments in crypto currencies. VCs have smart teams working for them managing billions of dollars of investments and they are tasked with investing in assets that provide the best returns on investment (ROI).

Top venture capital firms investing in crypto currencies:

Andreessen Horowitz: Between 2006 and 2010, Andreessen and Horowitz were active investors in technology companies. Separately and together, they invested $80 million in 45 start-ups such as Twitter. During that time, the two became well known as super angel investors.

On July 6, 2009, Andreessen and Horowitz launched their venture capital fund with an initial capitalization of $300 million. In November 2010, the company raised another $650 million for a second venture fund at a time when the field of venture capitalism was contracting. In less than two years, the firm had a total of $1.2 billion under management in two funds.In May 2011, Andreessen Horowitz ranked as the number 1 venture capital firm by Investor Rank, based on the firm’s networks and level of syndication with other venture firms. Andreessen ranked number 10 on the 2011 Forbes Midas List of Tech’s Top Investors while he and Horowitz ranked number 6 on Vanity Fair’s 2011 New Establishment List and number 1 on CNET’s 2011 most influential investors list. As of March 27, 2014, the firm is managing $4 billion in assets with the closing of its fourth fund at $1.5 billion.[Wikipedia]

Sequoia Capital is an American venture capital firm. The firm is located in Menlo Park, California and mainly focuses on the technology industry. It has backed companies that now control $1.4 trillion of the combined stock market value. Sequoia manages multiple investment funds including funds specific to India, Israel, and China.[Wikipedia]

Union Square Ventures (USV), is an American New York-based venture capital firm, that manages assets totaling $1 billion as of March 2016. The firm is one of the top returning venture capital funds in the world, its 2004 fund returning 13.91 times cash-on-cash with an IRR of 67.0%. The firm has had a billion dollar exit every year since 2011 including Zynga ’11 at 7.7 Billion, Indeed ’12 at 1.4B, Tumblr ’13 1.1B, Twitter ’13 at 14.2 B, Lending Club ’14 at 5.42B, Etsy ’15 at 1.78B and Twilio ’16 at 1.23B. Additionally, the firm’s founder Fred Wilson, who is well recognized as one of the best venture capitalists in the world, has acquired a celebrity status in the tech world stemming in part to his blog AVC.com.[Wikipedia]

Founders Fund is an American San Francisco-based venture capital firm investing in companies building revolutionary technologies. The firm invests at all stages across a wide variety of sectors, including aerospace, artificial intelligence, advanced computing, energy, health, and consumer Internet, with a portfolio that includes Airbnb, Knewton, Lyft, Spotify, Stripe, and ZocDoc. Founders Fund was the first institutional investor in Space Exploration Technologies (SpaceX) and Palantir Technologies, and one of the earliest investors in Facebook. The firm’s four General Partners, Peter Thiel, Ken Howery, Luke Nosek, and Brian Singerman, have been founders and early employees of companies including PayPal, Google, Palantir Technologies, and SpaceX. Formed in 2005, Founders Fund had more than $3 billion in aggregate capital under management as of 2016.[Wikipedia]

Bessemer Venture Partners (BVP) is an American global venture capital firm founded in 1911. The firm has $4.5 billion under management and operates offices in Menlo Park, San Francisco, New York City, Boston, Israel, and India.[Wikipedia]

Andreessen Horowitz, Sequoia Capital, Union Square Ventures, Founders Fund and Bessemer Venture Partners all invested in MetaStable Capital, a hedge fund with a ‘Proven Track Record of High Growth from Digital Currencies.’

“We believe blockchain technology has the potential to transform vast segments of the global economy.

Exposure to both White and Black Swans.

White swans: if the Internet continues to permeate every aspect of our lives, devices will negotiate payment with one another using digital currencies.

Black swans: if a major economy collapses, if interest rates shoot up, if countries clamp down on currency leaving their borders, we will see a huge amount of capital flow to decentralized cryptographic assets that are free from government control.

We Invest in Coins, not Companies

An investment in blockchain companies has three layers of risk:

1. The underlying currency must appreciate.
2. The company must execute well.
3. The investor must wait until a liquidity event.

By investing in the underlying digital currency, we remove these last two risks.

There’s more to Digital Currencies than Bitcoin

Anonymity
Bitcoin is not anonymous. All balances and all transactions are visible to everyone, for all time.
However, there’s a huge desire for anonymity. It’s why 30% of the wealth of High Net Worth individuals is held offshore. An anonymous protocol could eat into a significant portion of bitcoin’s market cap (if not the majority).

Consensus and Governance

Bitcoin’s Proof-of-Work approach to consensus wastes energy, and is vulnerable to 51% attacks. Many people believe the underlying dynamics of asic-driven mining will lead to a centralized duopoly.

In contrast, other coins have different consensus mechanisms, and one of these may emerge as superior to bitcoin proof-of-work. And some coins have governance models that allow for rapid evolution of the underlying protocols, allowing for much faster innovation than bitcoin.

Smart Contracts
The Bitcoin protocol is very simple, allowing little more than moving value from one address to another.

In contrast, some coins have fuller expressability at the protocol layer, which allows for the creation of smart contracts and Distributed Autonomous Organizations. Because of this expressability, there are currently far more applications being built on top of Ethereum than Bitcoin.

The emergence of digital currencies is a black swan event with extreme upside potential for investors.

Bitcoin is currently the clear leader of this space, but there are many scenarios under which other AltCoins could capture a significant portion of the digital currency economy.

However, choosing the right AltCoin (and storing it securely) is difficult.

The principals of this fund are highly technical (with deep cryptographic experience), and we believe this background will prove advantageous in choosing the few AltCoins that provide real, long-term value.

An intelligent investment approach in digital currencies would allocate some percentage of funds into AltCoins. MetaStable allows investors to easily choose how much exposure they want to the AltCoin market.” – MetaStable.

MetaStable Capital: a start-up hedge fund based in San Francisco that invests only in cryptocurrencies such as Bitcoin and Ethereum. Since its launch in September 2014, MetaStable has delivered such eye-popping performance with profits of more than 500%. – Fortune Magazine.

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