MetaStable Capital Does Not Want to Sit Next to You

The enigmatic firm, MetaStable, founded in 2014, does not want to sit next to you. MetaStable is not for your average crypto enthusiast; the minimum buy in to any of its funds is $1 million and a 1-year commitment. Additionally, performance fees on its funds can be quite high–25% of the profits on one of its riskier funds, with a 2% management fee in tow. 

MetaStable is not interested in publicity, and even seems to avoid it–it did not announce its most recent round of fundraising. Regardless of this intentional obscurity, the fund has produced a return of 539% as of mid-March this year. The meteoric rise of Bitcoin, Ethereum, and Monero since then (which still holds in spite of recent dips in the market) means that returns are actually considerably higher than that. The fund may be small by hedge fund standards–reports range from $45-$69 million–but the numbers are nevertheless astonishing.

Naturally, this has attracted an impressive lineup of investors, mostly at the institutional level. Reported backers include: Bessemer Venture Partners, Sequoia Capital, Union Square Ventures, Andreessen Horowitz, and the Founders Fund.

The most notable of this bunch is Sequoia Capital, an investment firm based out of California. Sequoia is most famous for investing in companies that are now responsible for controlling $1.4 trillion of the combined global stock market value.

In its 45-year tenure, Sequoia has only backed one other company that was anywhere close to the world of blockchain, Polychain Capital. Despite the fact that a visit to Polychain’s website (polychain.capital) reveals a surprising lack of information, Andreessen Horowitz and Union Square Ventures (who also have holdings in MetaStable) bought into Polychain to the tune of $10 million dollars.

The Method: Blockchain Hedge Fund Strategy in Practice

Polychain, as one of the original crypto hedge fund firms, operates similarly to a venture capital firm–that is, it has made most of its money off of ICOs. So far, its roster includes Ethereum, the IPFS ecosystem, Tezos, Rchain, PolkaDot, Difinity, and Cosmos. All of these assets are protocols; that’s not an accident. Polychain seeks to invest in assets upon which applications can be built, rather than in the applications themselves (such as Augur or Melonport).

MetaStable has a different investment strategy. Rather than buying into ICOs, and seeking assets with any sort of pre-established function, MetaStable has holdings directly in digital currencies with the underlying belief that these currencies will eventually become money that is used practically “IRL” (see: Japan). So far under its belt are Bitcoin, Ethereum, Monero, and about ten more. The firm is keen on avoiding what it refers to as “pump-and-dump” scams, and seeks coins that have constructive and practical use.

Hedge Funds and Crypto: a Blossoming Future

As cryptocurrency continues to enter into mainstream financial culture, all eyes are turning towards its massive potential and rapidly increasing capital. Hedge Fund Alert reports that firms Arthur Bell, Cole-Frieman & Mallon, and MG Stover & Co. are in the process of introducing over fifty new funds within the near future. Even more remarkable is the fact that only six months ago, there were a paltry six such funds, the original being Pantera Capital.

These new funds, and the funds managed by MetaStable, will operate similarly to traditional hedge funds; high fees and restrictions abound. However, it is likely that funds targeting smaller, non-institutional investors may begin to appear as demand increases.

Needless to say, this is an unusual and extraordinary opportunity for investors. In the words of former Goldman-Sachs executive Matthew Goetz, “It’s not often there’s a new capital market being born in front of you.”