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Novogratz's Crypto Trading Desk Lost $136M in Nine Months

bloomberg.com

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Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#31

Post by JumpCrisscross »

apo wrote: post #30

This article was published November 28 of this year. From mid-November to now, cryptocurrency exchange rates have fallen by about 50% across the board, with some much higher. This move took many speculators, including Novogratz, by surprise: "I did think Bitcoin was going to hold at $6,200," said Novogratz. "It stayed there for four months. It felt like the selling was finished. But then Bitcoin Cash decided to fork…

> Novogratz and many others are headed for a world of pain

Management fees make for good medicine.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#32

Post by village-idiot »

apo wrote: post #30

This article was published November 28 of this year. From mid-November to now, cryptocurrency exchange rates have fallen by about 50% across the board, with some much higher. This move took many speculators, including Novogratz, by surprise: "I did think Bitcoin was going to hold at $6,200," said Novogratz. "It stayed there for four months. It felt like the selling was finished. But then Bitcoin Cash decided to fork…

Lightning is never going to happen. They have absolutely no idea how to scale that network or handle the routing problem. The entire system is just rife with potentials for monopolies and abuse. No consumer in their right mind would ever commit their money to it.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#33

Post by paulie_a »

AznHisoka wrote: post #9
simias wrote: post #3

I mean, given how hard cryptocurrencies crashed this year is it really a surprise? The only way for him to make money would probably have been to short everything continuously but seeing how irrational and easily manipulated the cryptocurrency market has been in the past that seems rather foolish. Given his pedigree you'd think he'd know better than to bet on something that's 99% pure unbridled speculation and 1% act…

One of the best kept secrets in the hedge fund/financial industry is that most people really dont have a clue what they are doing. Sure they make bold predictions, appear on CNBC and use industry jargon. But at the end of the day, they arent much better than you or me at managing large amounts of money.

It's always sad when I get my upwards of 10 percent by professionals. I personally get 500-1000 percent return year over year. I'm working with small amounts of money that if I lost entirely wouldn't be the end of the world. But some years they barely beat inflation.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#34

Post by bduerst »

blake8086 wrote: post #26
owenversteeg wrote: post #11

“Remember, bubbles happen around things that fundamentally change the way we live,” he said. Ah yes, I remember how beanie babies changed the way we all lived. And tulips, of course. And rhodium? Hmm.

And dot-coms! And real estate! Hmm.

Ships can't ever sink when all you look at are the ones that are still floating.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#35

Post by village-idiot »

kilo_bravo_3 wrote: post #13

I like how cryptocurrencies were launched as an alternative to central banking, wresting control of money away from the government and big banks. An open and level playing field that would democratize how people transact financially with each other. And then the first thing the early adopters did was recreate the flawed financial institutions that surround "real" money so that they could pretend to be Gordon Gekko an…

Turns out those middlemen served a legitimate purpose, and most of the people advocating for their removal had absolutely no idea what they were talking about.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#36

Post by apo »

village-idiot wrote: post #32
apo wrote: post #30

This article was published November 28 of this year. From mid-November to now, cryptocurrency exchange rates have fallen by about 50% across the board, with some much higher. This move took many speculators, including Novogratz, by surprise: "I did think Bitcoin was going to hold at $6,200," said Novogratz. "It stayed there for four months. It felt like the selling was finished. But then Bitcoin Cash decided to fork…

Lightning is never going to happen. They have absolutely no idea how to scale that network or handle the routing problem. The entire system is just rife with potentials for monopolies and abuse. No consumer in their right mind would ever commit their money to it.

Lightning is never going to happen.

It's happening right now:

https://bitcoinmagazine.com/articles/progress-report-lightni...

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#37

Post by village-idiot »

apo wrote: post #36
village-idiot wrote: post #32

Earlier quoted context omitted.

Lightning is never going to happen. They have absolutely no idea how to scale that network or handle the routing problem. The entire system is just rife with potentials for monopolies and abuse. No consumer in their right mind would ever commit their money to it.

Lightning is never going to happen. It's happening right now: https://bitcoinmagazine.com/articles/progress-report-lightni...

For something that’s supposed to compete with Visa, $1m isn’t exactly “happening”.

Edit: supposedly there is $62 billion worth of BTC sloshing around out there. If you take that number at face value, then close to .0016% of BTC has been committed to the lightning network. This is not “happening” by any stretch of the imagination.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#38

Post by sp821543 »

village-idiot wrote: post #32
apo wrote: post #30

This article was published November 28 of this year. From mid-November to now, cryptocurrency exchange rates have fallen by about 50% across the board, with some much higher. This move took many speculators, including Novogratz, by surprise: "I did think Bitcoin was going to hold at $6,200," said Novogratz. "It stayed there for four months. It felt like the selling was finished. But then Bitcoin Cash decided to fork…

Lightning is never going to happen. They have absolutely no idea how to scale that network or handle the routing problem. The entire system is just rife with potentials for monopolies and abuse. No consumer in their right mind would ever commit their money to it.

"I'm selling it all because I have it on authority that Lightning's never going to happen."

"Oh really? Who'd you hear that from?"

"Village-Idiot" :facepalm:

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#39

Post by dragontamer »

misiti3780 wrote: post #16
AznHisoka wrote: post #9

Earlier quoted context omitted.

One of the best kept secrets in the hedge fund/financial industry is that most people really dont have a clue what they are doing. Sure they make bold predictions, appear on CNBC and use industry jargon. But at the end of the day, they arent much better than you or me at managing large amounts of money.

to back this up, read the expose in the economist this week about family offices and how they all divesting from hedgefunds because the fees are ridiculous and they are doing no better than the S&P, usually worse when you take into account the onerous fees those mgrs are charging.

To be fair, when you have $100 Million, the goal of the game is not "growth", but holding onto that money.

$100 million isn't much different from $108 Million (8% gains over the year)... or even $500 Million. In both cases, its still more than enough money to live on for the rest of your life. The S&P 500 has dropped 50% in the past (ie: 2008), and it doesn't make sense to risk that much money on that.

You can't use bank accounts: FDIC insurance only covers $200k per bank. You'd literally need 5000 different bank accounts to hold $100 Million safely. So what do you put it into?

Answer: things that don't grow as quickly as an S&P500 fund. Things that are safer: municipal bonds, international (German, Japan) bonds to hedge the dollar, and US Bonds. Maybe some high-quality corporate debt, like Apple's debt, and maybe a real-estate project or two.

All of which probably returns less than the stock market. But your $100 Million will still be there in the next crisis. That's not necessarily true for an S&P500 fund.

------------

Finally, the average volume of Vanguard Total Market ETF is only ~3-million (at a price of ~130 or so). Which means that Vanguard Total Market ETF only has ~$300 Million changed each day.

If you pump $100 Million into an ETF with only $300 Million worth of daily average volume, what do you think will happen? You'll over-centralize the price and get a bad deal. Its not easy to move $100 Million, even into a major fund like Vanguard's Total Market ETF, without a manager.

At $100 Million+ size portfolios, you need to start thinking of Dark Pools of Liquidity (ie: somewhat hiding the order book). So that when you execute the buy order, the wolves of Wall Street won't own you.

$100 Million+ accounts don't work the same as a normal account. Pump that into the market in one day, and the price will rise dramatically. Sell that in one day, and the price will drop dramatically (losing a % of your value on both legs of the transaction). Having an expert guide you, so that you can minimize Bid/Ask issues, is essential.

Re: Novogratz's Crypto Trading Desk Lost $136M in Nine Months

#40

Post by startupdiscuss »

lordnacho wrote: post #12

The article is missing some critical details. What does the fund do? The article suggests they do arbitrage. Those opportunities actually tend to increase when things are volatile. Also while you can lose money doing it you wouldn't expect a precipitous collapse in NAV. If you discover you're slower than everyone else you can shut down. Volumes aren't necessarily correlated to price either, so that isn't entirely con…

You need volume for liquidity which you need to execute the arb.

So, for instance, cryptoA trades for $99 on exchange 1, but $101 on exchange 2. Quick, buy on exchange 1 and sell on exchange 2!

Congrats you made $2 on each trade x 5 cryptos. That is hardly enough volume to make it happen.

Now imagine that the volume is so thin that after you bought the first one on exchange 1, the price gap closed, and by the time you sold on exchange 2 it collapsed.

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