The outstanding tech figure Michael Arrington, the founder and former co-editor of TechCrunch, announced on November 28, 2017 the Crypto-Denominated Hedge Fund. A new hedge fund will be denominated in a bitcoin’s competitor cryptocurrency Ripple (XRP).
At an investor conference in New York Michael Arrington announced that he is launching a new $100 million cryptocurrency hedge fund called Arrington XRP Capital.
The fund is the first of its kind to be denominated in a crypto-currency rather than dollars or euros. Consequently, it will require all limited partners (LPs) to make investments in XRP. All distributions, fees, etc. will also generally be paid in XRP. “We’ll pay our own fees and salaries out in XRP as well. We want to ‘eat our own dog food’ and be active users of crypto currencies in as many parts of our fund operations as possible, not just investors,” Michael Arrington said.
Speaking of the currency choice, XRP is the third or fourth largest cryptocurrency by market capitalization (depending on the method of calculation), which makes ~ $27 billion. XRP is the only currency in the Ripple network that does not entail counterparty risk, and the only native digital asset, which among other things provides a much faster way to conduct transactions if compared to conventional money.
The hedge fund will invest primarily in digital assets and ICOs (or initial coin offerings), which involve sale of digital tokens that can provide access to file sharing, and online service. According to Arrington, they will to a lesser extent invest in the equity of crypto-related startups:
“We will invest in a wide variety of cryptocurrency assets and related technologies. The primary focus will be on existing tokens. The fund will also invest a portion of its assets in ICOs, as well as more traditional investments such as private equity offerings.”
“A year ago I was just a crypto enthusiast. Now I’ve altered my career path to focus entirely on cryptocurrency and related technologies. And this isn’t just a short term focus. With this new fund I’m signaling my intent to spend the rest of my career on cryptocurrency. There will be dramatic ups and downs along the way, but we’re in this for the long haul”, Arrington said in the interview.
“Some people think this is crazy and that we’re on the edge of a bubble-bursting meltdown in cryptocurrency’s values. After all, a year ago the total market value of all cryptocurrencies was just shy of $14 billion. Today it’s over $300 billion. XRP alone has increased from $0.007 to $0.271 (a 38x jump) over the last year. Others, however, argue that we’re just getting started in crypto. I’m one of those people.”
All in all Arrington hopes the fund’s size will encourage a further diversification of cryptocurrency use in the token sales that often bootstrap these efforts.