A Discussion around Investing in Cryptocurrencies - Mitchell Dong
Mitchell Dong is a serial entrepreneur and savvy steward for investors. He is the CEO of Pythagoras Investment Management, a hedge fund which trades cryptocurrencies. Mitchell’s fund is the oldest and largest Bitcoin trading fund, and they manage it with an Ivy League academic team. Mitchell has managed hedge funds for 25 years and has been starting and selling businesses for half a century with a half a dozen successful exits.
An astute investor and pioneer in the Bitcoin industry, Mitchell participated in a panel discussion about investing in cryptocurrencies, sponsored by the Sudrania Fund Services.
Read excerpts of Mitchell’s interview below.
Mitchell, what is bitcoin/cryptocurrency?
“Originally conceived, Bitcoin was designed to be an electronic payment system like PayPal or Venmo. Now, it’s a currency like the Japanese Yen, the Euro, or the US Dollar. However, instead of being backed by the government, it’s backed by a community of users. It’s a commodity, almost like gold. Some people refer to bitcoin as “digital gold”.
“To use some government classifications, the IRS classifies Bitcoin as “property”. The SEC classifies some cryptos as “security” and the CFTC classifies Bitcoin as a “commodity” — subject to all government rules and regulations.”
Do you think I should invest in Bitcoin?
“Honestly, it could be fun to buy a tiny amount — maybe $100 or $1,000, to learn. It is very similar to buying stock, you check the price regularly and follow the news. This is an efficient and inexpensive way to gauge whether or not you like the price fluctuations and the risk/return characteristics. Then you can go on to decide if you want to buy more or not.”
Why should I, as an individual, invest in Bitcoin?
“Bitcoin has the potential upside and isn’t correlated to stocks, bonds, commodities, and other asset classes. Bitcoin could diversify your portfolio, and vastly improve the overall performance of your portfolio. However, given the potential downside, I would not start with more than 1% of your portfolio in this volatile asset class.”
How should I invest in Bitcoin?
“There are many ways to get exposure. First, you can buy it yourself by going into a crypto exchange. Second, you can buy a BTC or crypto index fund. Third, you can buy equities with BTC or crypto exposure, although it can be hard to find a pure play. Another way would be to invest in a VC fund that invests in block-chain companies. Fifth, you can invest in CTAs or trend followers who focus on the crypto market. Lastly, you can invest in arbitrage traders or funds that focus on this highly efficient market.”
What is defi?
“Defi is decentralized finance. Initially, it’s a way to deposit your crypto and earn interest and rewards, in order to get high interest rates. Given the zero interest rate environment, people have flooded the defi money markets crypto assets. It has grown from a few hundred million dollars, to over a billion dollars locked in this space — all this in just a year!”
Finally, Mitchell, what is your outlook on bitcoin/cryptocurrencies?
“I am bullish, because I see mainstream adoption coming. Every month, there is another big financial institution announcing its initial forays into Bitcoin. Also, there are thousands of applications to the block-chain technology scaling up, and they all need cryptocurrencies to compensate the operators of block-chain.”
Thank you for sharing, Mitchell.