Call it the latest sign of the sea change.
Announced today at CoinDesk’s Consensus: Invest in New York, TechCrunch founder Michael Arrington revealed he’s raising $100 million for a hedge fund that will buy and hold crypto assets while making investments in token sales and (some) equities and debt.
Launched under a new entity called Arrington XRP Capital, the fund claims to be the first that will require all limited partners (LPs) to make investments in XRP, the cryptocurrency that powers San Francisco startup Ripple’s RippleNet software. The fund will also use XRP for all distributions and fees.
However, most notable about the debut may be that Arrington emphasized how it marks what he considers the next phase of his career, one that has already seen him found TechCrunch, one of the most successful internet-era media startups, as well as CrunchFund, a venture fund with 55 exits to date.
Arrington told CoinDesk:
“In the last several months, I’ve gone from crypto enthusiast to 100 percent crypto. I’ve only been looking at crypto deals. This is what I think I’ll be doing the rest of my career.”
Far from a bubble, Arrington said he believes that the $300 billion cryptocurrency market represents only the beginning of a larger and more diverse ecosystem of assets.
“I seriously think that we’ll be in the trillions next year, and that we’ll start to see institutional money,” he continued. “I think next year you’ll see significant gains.”
Joining Arrington in the fund will be Heather Harde, a former CEO of TechCrunch, as well as two other unnamed partners. Arrington said that the fund has $50 million committed to date, with an eye to close it before the year’s end.
Given the nature of the fund itself, however, he noted that he is targeting a more specialized demographic of existing cryptocurrency investors.
As opposed to the new buyers enticed by the rising values of bitcoin, ether and other cryptocurrencies, Arrington said he’s looking to attract the “large number” of wealthy individuals with already significant holdings in the market.
“If they want to invest in a hedge fund, they have to convert to fiat, then the hedge fund will convert it into crypto for investments. With this, you can do a quick swap,” he said.
Secret sauce
Yet, in an interview, Arrington credited the launch, in part, to the idea that venture funds are “not ideal” for crypto investments, given the approval process they need to conduct with LPs.
He also went on to frame the fund’s use of Ripple’s XRP token as one that would improve on the existing cryptocurrency hedge fund model by easing pain points.
One of the most notable issues, he said, is how such hedge funds typically take investments in fiat currencies, only to have to then invest bitcoin or ether in a new cryptocurrency launch.
“We think XRP is a particularly useful currency because of the transaction times,” he said. “I think it makes a lot of sense to denominate a hedge fund in a cryptocurrency, the only downside is [potential] volatility against fiat.”
In return, Arrington said he hopes the fund’s size will encourage a further diversification of cryptocurrency use in the token sales that often bootstrap these efforts.
For example, he framed the market as overly reliant on bitcoin and ether, the two largest assets by market capitalization, and his fund as one that is staking its claim on a solution.
He concluded:
“I think investors are maybe heavier in bitcoin and ether than they should be.”
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Ripple.
Image via JD Lasica on Flickr