The Ledger
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Drogen: Most long/short equity hedge funds gamble with beta, not alpha
“The biggest thing that coming into this world, even being a Geller, That I learned at Estimize in talking to so many of these firms about their process for generating trading ideas and fundamental estimates and all of this stuff is really that at the end of th…”
Drogen: Bitcoin is an investable global digital religion and Ponzi scheme
“This stuff was just religious proselytization as a financial asset. Like if you could own a digital religion, would you want to? Yes, absolutely. The first global digital religion that is basically a Ponzi scheme But you can own it. And that seems like a great…”
Drogen: Anyone claiming to know which crypto tech wins is lying
“My hypothesis here in this entire technology ecosystem, and this goes back to the mistakes that I made in 13 and 15, is I don't think anybody understands which one of these technologies is going to win long term. And if they tell you they do, I think they're f…”
Drogen: Bitcoin will not become a global reserve currency or inflation hedge
“The techno libertarians who felt that this could be a new global reserve currency, that it was an inflation hedge, that you could extricate yourself from holding fiat government currency and things like that. I think a lot of people drank that Kool-Aid, and it…”
Drogen: Liquid crypto token quality is worse than dot-com bubble equities
“Now, unlike the public equity markets back then, even through the tech bubble, where there was a lot of shenanigans and bad companies that went public, it's not even close to the number of terrible projects and things that are tokens today. Like the percentage…”
Drogen: Crypto investors must avoid cynical 'midwit' overanalysis to succeed
“The goal in crypto is simply don't be the midwit. That's it. Just don't be the midwit, because there are a million reasons why a marginally smart person would look at all of this stuff and say, that's ridiculous. That that is never going to work. That there's …”
Drogen: Crypto liquidity caps funds at $1B; cannot support $10B funds
“Whereas in crypto, because of the limited liquidity these days, you can run a 500 to billion dollar liquidly traded crypto firm Pretty well in an inefficient market. You may not be able to run a ten billion dollar firm these days there, which is why you may no…”
Drogen: Discretionary hedge funds misuse alternative data to confirm pre-existing biases
“The discretionary hedge fund world still is basically spinning in circles, trying to figure out the relationship between analyzing a data set and using whatever analysis comes out of that data. And they are still woefully I would say misguided on one basic lev…”
Drogen: Bitcoin is poorly designed for broader internet use cases
“And if you look at what Bitcoin is, it's a good first crack at solving a pretty fundamental technology problem, but it's not actually designed very well for all of the things that even the earliest people on the internet wanted to be able to do.”
Drogen: Ethereum remains an experiment that might not prove scalable
“Even Ethereum is still an experiment. It may not be scalable.”
Drogen: Tech startups rarely reach escape velocity after lasting growth dips
“There are very, very, very few examples of technology startups that go through a significant and lasting dip In the fundamentals, the growth of whatever they're trying to do, and then recover to escape velocity later. Inherently startups either do it or they d…”
Drogen: Financial transactions and leverage will likely move on-chain within decades
“This is a 10, 15, 20, 30 year kind of out thing. We need to get to the point where this technology is scalable enough to be able to handle transactions at a much faster rate. But it looks like, based on these adoption curves, we will get there eventually, and …”
Drogen: Investors claiming to consistently outsmart the market are merely lucky
“When people believe that that's the case, I sit there and I just look at survivorship bias and say, the only people who are still around saying that are basically the lucky ones.”
Drogen: Markets discount two to five years out, not a decade
“And they're not really discounting a decade out, but they are discounting two, three, four or five years out.”
Drogen: Dixon and Wilson build winning crypto tech rather than predict it
“There are a couple of people out there like Chris Dixon at Andreessen Horowitz, Fred Wilson at Union Square Ventures that they're making these things. But anybody else, I don't think any of us knows which one is going to win long term.”
Drogen: Quantitative trend models beat cap-weighted crypto benchmarks
“When we looked, both of those models were wildly successful at beating a market cap weighted benchmark of the top five coins.”
Drogen: Starkiller is building a systematic, high-velocity 'shitcoin' trading strategy
“Interestingly, we're actually working on a completely separate shitcoin trading strategy that is fully systematic, that is much more high velocity than the core strategy that we run. It's exactly what you think it is. It's tied directly to just volume spikes o…”
Drogen: Institutional allocators cannot survive an 80% crypto drawdown
“So it's just no pension fund, no, no big asset management firm can suffer a 80% drawdown and live to tell that tale. Just not going to happen with their LPs.”
Drogen: Starkiller's quantitative models exit after market tops, not before
“Now, our models are not designed to get out before the top. They're inherently designed to get out on the other side of the top because of the momentum characteristics of the market, these bull markets, these adoption cycles can go on way longer than we'll exp…”
Drogen: Starkiller steps back into crypto markets over one to two weeks
“And so what we try and do is we try and look at all of these in conjunction and we do try and step back in, but our timeframes are not stepping back in over the course of two months. It's stepping back in over the course of A week or two.”
Drogen: Starkiller runs continuous yield farming across all portfolio assets
“We also, on top of the beta portfolio, we run yield farming strategies on all of our assets at all times.”
Drogen: Crypto alpha concentrates in annoying, high-friction tasks like wallet setup
“The most alpha is usually found in the things that are annoying and hardest to do. Meaning if you have to set up a new wallet, if you got to get on some new exchange, if you got to learn some new protocol.”
Drogen: Traders accustomed to small daily swings cannot survive crypto volatility
“As a trader, you have to completely reframe your own emotions relative to vol, because this market, it's insane in terms of the amount of vol, and if you're used to your portfolio swinging around one or two percent a day, like, you are not gonna make it here.”
Drogen: Estimize converted 25% to 30% of early institutional targets
“We got roughly 25, 30% of the people that we approached to participate, which is a pretty high ratio for something that's new.”
Drogen: Unlike equities, crypto tokens reach liquidity in 12 to 18 months
“Unlike equity markets where companies will stay private for five, six, seven, 10 years in crypto, like the token might be liquid a year or a year and a half after you invest in it.”
Drogen: Starkiller hedges beta using Bitcoin and Ethereum perpetual futures
“And what usually happens is we'll hedge with some super liquid assets that we can do very cheaply, specifically perpetual futures contracts in Ethereum, Bitcoin, and a couple others.”
Drogen: Starkiller models its investment approach on AQR and Tiger Global
“We try and pattern ourselves off of some mix of AQR and Tiger Global, and I think he's done it right, and he's taken his lumps along the way sometimes, but Times like this, he gets to come back and say, Hey, look, you know, the process works.”