In part 1 of this series, I briefly covered why Arca was my favorite fundamental fund and why Three Arrows Capital was my favorite macro fund.
Today, I will discuss my favorite venture fund is and my favorite HFT fund in crypto.
There are many types of venture funds in crypto. Culturally, they fall into two buckets. One bucket is a bunch of young guns who are largely crypto native, meaning they have worked in the space for many years and have a deep understanding of the social/technical dynamics of crypto.
The other bucket is traditional venture firms moving into crypto. While these firms lack crypto native insight, they bring needed political and traditional business relationships. Furthermore, these funds are able to easily attract institutional capital because of their traditional brands.
There is only one venture fund in crypto that successfully straddles these two buckets, and that is Paradigm. Paradigm was founded by Fred Ehrsam, one of the co-founders of Coinbase, and Matt Huang, a previous partner at Sequoia.
As I scroll through their venture portfolio, nearly half of the projects I see are huge winners. What is even more impressive is their winners span across the more centralized areas of crypto, like Fireblocks, and the more decentralized areas, like Uniswap.
Yet venture investments is not the only area where the investment firm has strived. Paradigm effectively deployed the cash they raised into Bitcoin near the 2018 - 2019 bottom instead of keeping it in cash on the sidelines, meaning they organically increased their AUM dramatically just through the appreciation of BTC. Their conviction in having direct coin exposure at that time, when many VC funds refused to have direct coin exposure, paid off handsomely.
Finally, Paradigm has hired some of the most respected individuals across disciplines in the industry. From leading market researchers like Hasu to auditing experts like Samczsun to MEV experts like Dan Robinson, Paradigm truly has been able to attract the cream of the crop.
Only recently did people realize "holy shit, Jump trading must be killing it in crypto." Earlier this month, it came out that Jump covered the full amount (as projected) of the $320 million exploit on Wormhole, a Solana bridge. The fact that they financially were able to cover the amount is just as impressive as their clear commitment to the space.
Rumors are that Jump Trading generated $4 billion in revenue last year from crypto related activities, compared to $1 billion in their traditional activities, meaning that crypto is now their most important business segment. The company had completed a $350 million round last year that was deployed into crypto related activities.
In line with the culture of crypto, a 25 year old former intern, Kanav Kariya, spearheads Jump Crypto and holds the title of president. The individual is rumored to be the brains behind a large amount of the revenue generation.
Jump's strategies in crypto range from traditional market making to capitalizing on market inefficiencies within DeFi.
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