What the? Money managers and the fog of bitcoin

November 22, 2013

“I still don’t even know what it is” – Jim Chanos, famed short-seller and founder of $6 billion Kynikos Associates.

“You know,  I don’t understand bitcoin” – Bonnie Baha, head of Global Developed Credit at $53 billion DoubleLine Capital.

“I don’t really know enough to have a view” – Chris Delong, chief investment officer of $8.1 billion multi-strategy hedge fund Taconic Capital Advisors

“I don’t have any insight at all. I don’t know how it should be valued. I have no anchor as to what it’s worth”–  Steven Einhorn, Vice-Chairman of Omega Advisors

“I like sound currencies. I have no interest in that. I would stay away”  – Margie Patel, senior portfolio manager at Wells Capital Management.

Bitcoin, the decentralized and controversial unregulated digital currency launched in 2009 , has been one of the biggest stories of 2013. In fact, this week bitcoin was the subject of two congressional hearings, which were reportedly more or less positive for a medium of exchange that has been linked to drugs, money laundering, murder for hire and other illegal activities. The digital currency is not backed by any government or central bank.

So when Reuters had the opportunity to ask some of Wall Street’s savviest money managers about the virtual cash at the Global Investment Summit this week, we did so. The takeaway? Most of them either don’t know what bitcoin is, or what its supposed value may be, with one or two exceptions.

Jason Ader, of Spring Owl Asset Management, purchased bitcoin (personally, not on behalf of clients) after the threat emerged that Cyprus could default on its debt, when the currency was trading at about $120. The price has since climbed, reaching a high of $675 on Monday, but Ader said he did not purchase “enough to matter.”

Two people who have acquired enough bitcoin to matter, are the Winklevoss twins. Cameron and Tyler Winklevoss, known widely because of their legal tussles over the founding of Facebook, say they own about 1 percent of the bitcoin market. The supply of Bitcoin is limited and “mined” by solving math problems. Earlier this year the brothers filed plans to launch the Winklevoss Bitcoin Trust, an exchange-traded product that would allow investors to trade the currency like stocks.

“I think the twins are ahead of their time,” Jason Ader said. He views this nascent bitcoin period as parallel to the early days of online gambling.

Todd Petzel, the Chief Invesment Officer for Offit Capital Management, which advises on $7 billion for wealthy investors, said he’s been getting questions from clients about bitcoin, asking, “should we be getting this?”

Colin Teichholtz, co-head of fixed income trading for $14 billion hedge fund firm Pine River Capital Management, thinks the virtual currency is fascinating.

“I’ve been researching it and have some idea of how it works,” he said, but he’s not buying it. “My guess is, somehow it all ends badly.”


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I have a pretty good understanding of the Bitcoin protocol, source code and history for the past 4 years.

I am extremely excited by this technology and the upcoming types of businesses that can build on top of this.

However, I too think that somehow it will end badly for a lot of people. Bitcoin is being traded as if the units need to be extremely valuable if the technology is to be successful.

People are buying the currency instead of investing in the infrastructure and will end up with worthless stock like during the Dotcom bubble. Your investments need to have a plan behind it. Don’t treat it like another Keynesian beauty contest.

I’m bullish on Bitcoin, just not on the price per unit.

Posted by Harold_Stanly | Report as abusive

Oh yes, Colin Teichholtz, it will end badly… end badly for you and all others who completely missed the train!

Posted by Vengeance | Report as abusive