Bitcoin and the rich | Financial Times

Bitcoin and the rich |  Financial Times

Quick on the draw: a decade on from first investing, Sandra Ro has made a substantial fortune from bitcoin © Pascal Perich But bitcoin still divides opinion. For some it is an obsession, for others a speculative bubble. Yet financial industry analysts say that few people really understand how it works. To make life more complicated, it has spawned scores of other cryptocurrencies, all based on complex computer-driven calculations but with different levels of liquidity and transparency. “We have seen UHNW individuals and family offices looking into cryptocurrencies and becoming interested in allocating some portion of their investments into crypto,” says Calvin Koo, a Hong Kong-based lawyer at Kobre & Kim. “But it’s important to make sure investors don’t inadvertently step into a minefield.” Recommended

Bitcoin and other cryptocurrencies are also gaining traction as a store of value for financial institutions. Banks are queueing up to compete — Goldman Sachs is trading cryptocurrencies while Citigroup is considering providing trading, custody and financing services. Billionaire investors openly discuss their cryptocurrency-related investments, while some large publicly listed companies, such as software company MicroStrategy, hold billions of dollars’ worth of bitcoin on their balance sheets. Today, bitcoin and its digital peers are becoming mainstream. The hype reached new heights this year after the cryptocurrency gained 600 per cent in value in 12 months. The mania has swept up not only retail investors but also very wealthy people. Ultra-high-net-worth individuals (UHNWs — people with assets of $30m or more) such as Paul Tudor or Stanley Druckenmiller were among the earliest backers of bitcoin, the biggest cryptocurrency, and are prominent in the market today.

Neither the sharp sell-off that hit cryptocurrencies last month nor the surrounding turmoil should obscure the fact that these are now huge markets, with a combined value of $1.6tn. That is big enough as an investment pool for even the richest private investors and largest family offices. With a background in markets at global banks such as Deutsche Bank and Morgan Stanley, Ro was quick to grasp blockchain’s revolutionary potential. “What really piqued my interest was whether the tech could disintermediate financial markets. I thought, what the heck?” she recalls. “Bitcoin was trading at a couple of hundred bucks at the time and I bought a bunch thinking, what if it works? And guess what? It did!”

Another early believer is Olivier Janssens, a Belgian-born entrepreneur who states his profession on LinkedIn as an investor in bitcoin since 2010. He is also proudly “self-educated” with an attraction to “libertarian and voluntarist” ideas and forged a career as a software entrepreneur. In 2014, when bitcoin was trading at around €600, he became the first person to pay for a flight by private jet with the cryptocurrency. He settled the bill for the trip from Brussels to Nice with, he estimates, 15 bitcoin — in hindsight, a pretty costly trip. “ would be worth about €400,000 today,” he says. Crypto used to be messy. Now there are multimillion-dollar companies being built “I wasn’t surprised by bitcoin doing well, but there were always a lot of risks. There were hacks, regulatory risks and exchanges going bust,” she says. “Crypto used to be messy. Now there are multimillion-dollar companies being built.”

“Let’s just say, I have done very well. I have gone from being a banker to working at a non-profit,” says Ro, who studied at Yale and Columbia universities. “Getting in early because the tech seemed really cool also worked out as an investment, so that’s also pretty cool.” Being an early investor meant she has had to try a dozen exchanges, suffered hacks and been locked out of investments. Her friends have also done well from her foray, as she recalls giving them bitcoin “just to test out how it works”. Clearly, what makes the crypto field tempting are the stories of those who have struck gold. Ro is reluctant to say how much she is worth as a result of her bitcoin punt, as she has been targeted by scammers and has received death threats after talking about the subject. But she was able to leave full-time banking in 2017 — the year of bitcoin’s first significant rally, when prices rose from just above $800 to almost $20,000. Bitcoin’s surge to $63,000 earlier this year increased Ro’s fortune.

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