Never in a million years could I have told you that I would be pursuing my next career move in the world of crypto, but when I received a call from Seth Ginns (Head of our Liquid Opportunities strategy) in late May, that’s exactly what happened. I purchased my very first bitcoin after hanging up with him and couldn’t stop thinking about what the world would look like five years from now.
I’m not sure if it was the enormous amount of monetary stimulus that was being unveiled or the realization that I was already 100% digital with my Apple Pay wallet and Venmo account, but the concept of digital assets and Bitcoin (which goes well beyond the “digital gold” argument) made a lot of sense.
Reading David Pakman’s “The Crypto Mission” (shoutout to Venrock, our strategic partner at CoinFund), I realized how much we as satisfied users are controlled and severely at risk by the over-dominance of Google, Facebook, Twitter, and Apple. A decentralized consensus giving rise to a peer-to-peer network alternative seems obvious in retrospect. Shouldn’t our technology leaders be encouraging innovation and data protection?
The CoinFund team not only brings a 25-year crypto track record collectively, but they also bring 28 years of traditional equity, private equity and leveraged finance expertise. What really stood out to me was Jake, Alex, Seth, Oleg and Devin all left their prestigious, stable “traditional” posts (Amazon, American Capital, Jennison Associates, Kirkland and Ellis, BlackRock) to be able to influence the global blockchain ecosystem. Ryan, who joined us directly from MIT, conducted research on crypto asset-class economics with the MIT Digital Currency Initiative. I also recently discovered that my friend Ian D’Souza has been a professor of blockchain and digital currencies at NYU Stern since 2016. To me this underscores blockchain as a generational opportunity, and we will see an influx of young talent over the coming years.
The most important question I had to answer for myself was, can my marketing skills be helpful in building institutional partnerships for CoinFund? I knew I would be facing a steep learning curve. Once it became obvious that crypto as an asset class, and therefore blockchain the underlying technology, was about so much more than just Bitcoin, I knew that educating the institutional landscape on how to capture extraordinary, fundamental-derived alpha from this space was my next calling.
Just like any emerging asset class, crypto has its bulls and bears. Positive developments around liquidity, valuation, pace of adoption, central bank involvement and regulatory decisions have been significant tailwinds. Over the past month, the value locked in DeFi (decentralized finance) broke $3B, >3x growth in 6 months. Coinbase, the leading crypto exchange, is rumored to be planning an IPO in 6 to 9 months. In April, China announced trials for its digital currency with many other countries (US, UK, Spain, Uruguay, France, Japan and more) working on central bank digital currencies. Then layer on high barriers to entry and expansive white space — as Jake Brukhman — Co-Founder of CoinFund said, “Pallavi, the last thing that keeps me up at night is competition. There is so much white space that the whole fund ecosystem has plenty of room to grow, and in a collaborative way!”
Looking forward, the next 20 years will be a string of mini boom-bust cycles giving rise to the decentralized Amazons and Googles. Here are some fun facts: It took electricity 46 years to reach 25% of global market penetration. It took the modern internet 24 years to reach 50% of global market penetration. The first work on a cryptographically secured ledger (i.e. blockchain technology) was described in 1991. Bitcoin has over an 11-year history and was born out of the 2008 Global Financial Crisis.
I’ll leave you with this — in 2010, when I was entrenched in the structured credit world, a large portion of the investing community could not see beyond a universe of legacy, distressed RMBS that was plagued with liquidity, valuation, headline and regulatory concerns after the subprime crisis. “It’s just a trade with a lot of complex jargon,” they would say. I think it’s safe to say that the structured credit asset class has more than proved itself a decade later and those lacking exposure are in the minority. As an analog for crypto, structured products were complex in scope, but alternative data sources and technology helped to advance the asset class and today it is commonplace within portfolios of institutional asset owners.
Lastly, I want to thank Jonathan Barrett and my former colleagues at Luminus and LS Power for a wonderful five years — it was not an easy decision to move on. I am looking forward to helping build this new exciting ecosystem for the next five years, and beyond!