Former BlackRock Bond Specialists Prepare for Cryptocurrency Trade


Since Bitcoin has hit the $20,000 mark last year, major companies like Expedia, Subway, Shopify, and Microsoft are now accepting it as a payment option for their goods and services. Now, there’s little doubt about the validity of cryptocurrency’s value.  

Amidst the fear of bubble formation, Bitcoin prices continue to show potential growth, thus leading smart investors to think that it’s more beneficial to make an educated investment in cryptocurrency than to continue ignoring its increased value. This is the sentiment shared among former BlackRock bond veterans.

Adam Grimsley and Michael Wong, former bond specialists at BlackRock Inc., have set up the hedge fund, Prime Factor Capital, in London to trade cryptocurrency starting this April. Grimsley is to be the head of investment solutions while Wong is to be the chief investment officer. They found their third member in Nic Niedermowwe, who previously worked as an RWE AG energy trader.

The Deciding Factor

When asked why they’ve turned their backs on bonds and have planned to embrace cryptocurrency instead, Grimsley said that they had been constantly asked to diversify. The problem, he stated, was that credit markets were already correlated. Dispersion of one’s credit assets had already declined. However, with cryptocurrency, they see real uncorrelated returns.

Grimsley, Wong, and Niedermowwe are not alone in this kind of venture. There are many who also seek to take advantage of the opportunities given by digital currency. It has even opened up a wide spectrum of new jobs, from miners to data scientists.

The Prime Factor Capital may just prove to be profitable. In one of Blockchain Capital’s survey, 30% of millennials alone prefer to invest in 1,000usd of Bitcoin than in 1,000usd of stocks and bonds.

The Risks Taken

The three Prime Factor Capital founders admit that the valuation swings of Bitcoin, such as its 55% fall from its December peak, makes it difficult to determine exactly how to regulate cryptocurrencies. In other words, setting up a crypto assets investment management company takes a lot of guts.

Though Grimsley and Wong have a lot of faith in what they’re building, BlackRock Inc. does not share the same level of enthusiasm. Belinda Boa, the head of active investments for Asia-Pacific, said the Bitcoin’s bubble-like valuations makes cryptocurrency trading too risky. Mark Wiedman, the head of iShares exchange-traded funds, also said that he just could not see the firm launching any virtual currency ETF.

BlackRock Inc.’s opinion about Bitcoin is supported by UBS Group AG, who refuses to trade cryptocurrency in the fear that strict regulations will trigger a great drop in its value.

All these arguments have not deterred cryptocurrency players, however. The 1,400% rally in the last year is too hard to ignore.

The Bottom Line

Cryptocurrency can be the best innovation of this decade or it can be its biggest disappointment. No matter what it is, Craig Borthwick, a Dechert LLP senior associate, says that its volatility only creates great opportunities to make money.

Will the Prime Factor Capital prove BlackRock Inc. and other skeptics wrong? Only time can actually tell whether it will succeed or not.