A casino dealer collects chips at a roulette table inside Solaire Casino in Pasay city, Metro Manila, Philippines, March 27, 2015.
- Lawyer John Lore advises hedge funds and has seen a spike in specialist crypto funds asking for help.
- He said the background of his crypto clients is much more diverse than traditional fund managers. Some people approaching him about setting up funds are amateur traders who made it big.
- One would-be fund manager was so embarrassed by his new found wealth he apologised for turning $600,000 into $8 million.
LONDON - Cryptocurrency traders have become well-known for conspicuous displays of wealth.
Rows of Lamborghinis were parked outside the recent Consensus conference in New York and some attendees blew off steam at after parties in exclusive clubs with champagne, vodka, and even drugs.
But not all crypto enthusiasts are so ostentatious. John Lore, a lawyer who has advised over 30 cryptocurrency hedge funds, said one trader who approached him about setting up a fund, in fact, apologised to him, embarrassed by his crypto riches.
"Some of them make me feel bad about my own net worth and what I've done with my life," Lore told BI. "I even had a fund manager apologise for making so much money and said he'd donate a lot to charity.
"They'd put in approximately $600,000 and they, in January, were sitting at over $8 million. My son took one look at that and decided he's going to be a cryptocurrency manager."
Lore is the founder of Capital Fund Law Group, a New York firm that specialises in advising hedge funds and asset managers. Lore told BI he has seen a huge spike in the number of inquiries from people looking to set up cryptocurrency hedge funds.
"There's a lot of demand but I think right now there's a lot of need for education," Lore said. "Never has there been a more diverse group of potential managers come to us. These aren't just all former buy-side analysts at investment banks, they're coming from all different aspects."
Bitcoin rose over 1,000% against the dollar in 2017, while other cryptocurrencies booked similarly staggering gains. Lore said that this huge rally has created overnight wealth for even casual bitcoin enthusiasts, many of whom now believe they can replicate this success in fund management.
"I would say right now most fund managers are not looking to necessarily grow a large fund, they're looking to grow a track record," Lore said. "In 2017, the market's the track record - anyone who's in is doing great. No one would form a cryptocurrency fund without absolutely fantastic performance returns."
Bitcoin has slumped from a high of $20,000 in December to around $7,500 and the wider cryptocurrency market has followed a broadly similar trajectory. Lore said funds he advises are still seeing strong returns despite the market slump.
"There are funds in 2018 that have consistently had very high returns, often from this quantitative strategy," he said. "We have other funds that are poised now to do more long-term investing. But performance has not been the issue for most emerging fund managers."