Anthony Scaramucci isn’t fazed by the latest cryptocurrency market rout. But that doesn’t mean he’s telling investors to go all in on the asset class.
Fresh off a four-day jaunt to the Bahamas for a crypto conference, the Skybridge Capital founder and ex-White House communications director told Institutional Investor he believes that in a year or two, crypto and digital assets will be a “positive economic asset.”
He does have quite a bit of skin in the game: Skybridge’s crypto assets currently sit around $1 billion across several holdings. But despite the fact that stablecoin Luna’s ties to its peg have eroded and Bitcoin and Ethereum have faced roughly 30 percent declines in value in the past month, Scaramucci is staying calm. After all, he’s already been through eight bear markets. What’s one more?
“Everyone is a long-term investor until they have short-term losses,” Scaramucci said by phone. “My friends are extremely bearish.”
Scaramucci is of the belief that the stressors that are tamping down value across markets — not just in cryptocurrencies — will eventually come to an end. In his view, China will be unlocked as Covid subsides, the global pandemic will fade away, and “all wars do end.”
“We have the tendency to get emotional at the highs and lows,” he said. “We have a lot of emotional people at this current low.”
But, he added, that doesn’t erase his base case for cryptocurrency’s success. In Scaramucci’s view, the elimination of transaction fees and financial intermediaries could propel cryptocurrencies forward in the market. “Everything that we do, there’s a middle person,” Scaramucci said. For instance, say someone wants to send money to their family in another country. An intermediary like Western Union would take a percentage of the money sent as a fee. According to Scaramucci, using a digital currency like Bitcoin for that transfer would cut back on fees, making it more attractive for end-users.
But it’s not as simple as that. When confronted with the concern that the value of these currencies is volatile, Scaramucci acknowledged that it’s a barrier to uptake. “The short answer is that it’s not solvable today,” Scaramucci said of the problem. “If Bitcoin gets to a billion wallets or two billion wallets, we believe the price will become significantly more stable.”
He compared the currency to tech stocks — as Facebook and Apple scaled, they became less volatile.
Skybridge has directly invested in Bitcoin, Ethereum, and other currencies, and the firm has set up a special purpose vehicle to invest in one of the largest private bitcoin miners, Genesis Digital Assets. The SPV has about $50 million invested over two tranches.
Additionally, Skybridge runs an ETF that invests at least 80 percent of its net assets in stocks and ADRs in companies related to the crypto industry and digital economy. The firm runs a multi-coin fund for institutional investors, which held $100 million in assets before the crypto crash.
“Skybridge [has] basically made a decision to be a very big crypto [market] participant,” Scaramucci said.
All of these strategies are directional bets, long-only, and completely unlevered. “When we talk about risk management, it’s about sizing for an investor more than anything else,” Scaramucci said. “If you have $1, we’re recommending investing one or two pennies in this space.”
He added that his firm won’t hedge or short cryptocurrencies — but that’s not to say his team is naive about the risks involved. “This is a speculative asset,” Scaramucci said. “We’re not telling people that this is anything other than a speculative asset, because we don’t have full market belief in the power and the process of the asset. There [are] a lot of naysayers and doubters, a lot of shorts who don’t believe in the asset.”
And if they’re right? Scaramucci will be okay.
“If I’m completely wrong, I’m a well-capitalized person, I’ll reposition it once again,” he said. “If I’m not wrong, I predict we will get through the bear market. I think we’ll be sitting here 12 to 24 months from here looking at a positive economic asset.”