“At Goldman you’re always looking for alternative asset classes, and I said, maybe this is an alternative investment that we should start to take seriously,” Matta said.
The mania around the rise of cryptocurrencies has parallels to the dot-com boom from 20 years ago. Then, too, it wasn’t uncommon for Wall Street bankers to head west to Silicon Valley in search of fortunes. (Amazon founder Jeff Bezos had a series of finance jobs, including at a Deutsche Bank predecessor and quant hedge fund D.E. Shaw.)
The rise of cryptocurrencies has sparked a bull market in hedge funds tied to the assets. While only five existed before 2013, more than 200 were created since 2017, according to Autonomous Research.
By the time bitcoin and other coins began their dizzy ascent in 2017, Matta was known at work and with family as a crypto expert. “People were asking us about it nonstop, saying, ‘I’ll give you $50,000, can you do this for me?”’
The three founders are taking what they’ve learned on Wall Street and applying it to an asset class that was created to disrupt financial institutions. Their inaugural product is an index fund made up of the 20 largest coins; they charge 2 percent of assets under management.
Gains have been harder to come by this year. Concerns over regulation, fraud and high-profile hacks drove bitcoin down at the start of the year, losing more than half its value in January. It has since whipsawed investors, trading between about $6,000 and $10,000.
Matta is undeterred. He believes that digital currencies and the blockchain technology underpinning it have the potential to transform finance in ways that are hard to imagine.
“It’s either going to zero, or it’s going magnitudes higher,” he said.
Still, their little company has already had some success. Matta said they have made progress toward their goal of attracting $50 million in assets this year. They’ve hired five employees for a research desk. They are also in discussions with established trading firms seeking to make strategic investments in Crescent Crypto, Matta said.
Ironically, the three men have Goldman to thank for their success so far. “The Goldman brand is obviously very strong; people respect its people,” Matta said. “It gets you in the door in a lot of cases.”
And the investment bank is still a strong lure for talent, attracting a quarter of a million annual applicants for a few thousand positions. The talent system at investment banks relies on a steady stream of hungry young men and women to populate their trading floors, and most end up leaving. Matta said that when he left, he was one of the last members from his summer program.
He figures that even if crypto goes bust or his fund fails to get traction and his savings are wiped out, he’s gained invaluable connections and experience. In that case, Goldman could welcome him back, although he would prefer working for a start-up, he said.
“I don’t regret it at all,” Matta said. “It’s been the most exciting few months of my life, honestly.”