- The move builds on Point72 Asset Management’s forays into crypto derivatives
- The endeavor would require significant resources in terms of staff and operational expenses
According to four sources familiar with the matter, hedge fund billionaire Steve Cohen is laying the groundwork for an investment firm focused solely on cryptocurrencies.
Although the new company is still in its infancy, sources said the company plans to trade spot cryptocurrencies — a segment Cohen’s multi-strategy hedge fund firm Point72 Asset Management has yet to touch on. It would also trade digital asset derivatives and seek to write checks to outside digital asset-focused hedge fund managers, including potential seed deals.
The name of the startup, which was founded separately from Point72, Point72 Ventures and Cohen’s Family Office, is not known. But Cohen himself played a key role in its creation, which would require significant spending in terms of staffing, not counting expensive trading infrastructure and operational needs.
This is the latest indication that Cohen, who has bought stakes in crypto startups he sees as showing promise, is becoming even more bullish on digital assets. A growing number of well-funded traditional financiers are considering deploying big capital in space, aware of bottom-bottom prices as markets continue to rally following the collapse of Terra’s stablecoin UST and the demise of crypto lenders like Celsius and Voyager advised riot.
A spokesman for Cohen and his wealth management firms declined to comment. The sources were granted anonymity to discuss sensitive business dealings.
In addition to trading more vanilla spot cryptoassets, the new firm would likely dabble in decentralized finance projects, including yield farming, a source said. The burgeoning business would also seek to delve into staking, an area that will be given a spotlight ahead of Ethereum’s impending proof-of-work to proof-of-stake transition.
Though the startup is believed to have no immediate plans to raise outside capital, the venture is a mechanism for Cohen to begin laying the groundwork for a future broad-based crypto trading platform. Even during the bear market, competition for high-profile talent has intensified as competitors to Point72 multi-strategy hedge funds like Millennium Management have increasingly committed resources to the sector.
Even Citadel’s Ken Griffin, a long-time skeptic who last fall called the cryptocurrency a “jihadist reputation” against the US dollar, has reversed course, acknowledging that digital assets are here to stay.
However, the space is ripe for regulatory concerns as well as conservative limited partners of sovereign wealth funds who have urged caution about crypto. Both of these points are reasons billionaire hedge fund firms have largely avoided trading spot crypto products through their flagship vehicles, sources said.
“They are still working out the details, but the plan was not to put all the bread in the flagship fund,” a source said. “They clearly have a lot to learn about space. [Probably] are not ready to make this call yet.”
Regulatory uncertainty between the SEC and the Commodity Futures Trading Commission (CFTC) over whether bitcoin and ether are securities or securities has increased tensions.
“The regulatory stuff is something they’re also worried about,” a source said. “They’re concerned about how they’re actually touching this asset class.”
Assisting outside traders would be another way to gather information on viable – and crucially for the wealth manager, scalable – strategies without the complications that would come with investing directly in digital assets internally.
It’s overall a natural extension of Cohen’s angel investments in blockchain companies. Not all have stood the test, including dumping his stake in proprietary digital asset trader Radkl, but Cohen still enjoys preferential access to deal flow by traditional finance standards.
“[It’s probably] what all these other guys are doing,” a source said. “The companies aren’t into crypto, so they’re telling investors, but the founders are.”
Point72 has $26.1 billion in assets under management. The company is looking for a variety of candidates for its own in-house development of internal crypto operations.
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