Based on a true story
Water is a powerful force. Hydropower illuminates entire cities and can provide sustainable electricity for bitcoin mining. But water is also dangerous. Imagine the death bringing force of tsunamis or floods.
And when water is ice cold and your ship sinks because it ran into an iceberg, all you’ve left to say is:
“Jack, jack, come back”
But he never will.
You see, the free market can be just as merciless as the Arctic Ocean.
Turns out that this year, two Wall Street hunter-gatherers, Su Zhu and Kyle Davies largely caused the cryptocurrency market crash with their hedge fund – Three Arrows Capital. The ensuing financial tragedy swallowing whole anyone that had cluelessly invested in their magic tricks.
How did they do it?
The oldest trick in the book of the self-made super rich. Get a loan. A BIG one.
No, not like that. Not like the average person, bordering on begging. Putting your humble credentials on the line in return for somebody else’s dollars.
Here, you have to make your company look like a budding unicorn.
Then, choosing your targets with finesse (don’t say it to their faces), you convince them that “if they don’t invest NOW they are the big fools who didn’t invest in Bitcoin back in 2009.”
And it worked!
Voyager Digital gave $650 million to Three Arrows Capital. Genesis Global Trading gave them $2.3 billion (stop trying to imagine these figures, savor the satisfying mind-taste as they roll off your tongue). Blockchain.com gave them $270 million.
The 3AC boys were not entirely without credibility, though. They had impressive career biographies going back 20 years into each one’s high school days, so perhaps their spectacular fall was not entirely an engineered scam but rather a result of arrogantly, carelessly closing their eyes and noses. Refusing to see and smell the shit they had got the company into – growing too fast, yet rocketing inflation was already halfway to the moon.
Hedging makes absolute sense and if one remains awake, hedge funds shouldn’t lose much money. But hedging is scavenging. Eating the remains from financial battles between bulls, bears, wolves, lions, whales, dragons. It is hubris for a hedge fund to hedge beyond the growth curve of the market. And moreover, the cryptocurrency one, with winters so freezing they are ice ages.
It is like a hyena trying to run ahead of a bear pack. It will be eaten. Including all its backers. As dramatically happened to 3AC.
A hedge fund belongs at the back of the action, like a good movie reviewer. Eating free carrion and getting fat and happy, to the dismay of bloodied bears, bulls, wolves, lions, whales and dragons.
For all readers of Bitcoin News the moral of the story is simple. Don’t mess with shitcoins, stick to bitcoin. Don’t put your bitcoin at risk for unbelievable high returns because you might just steer straight into the iceberg.