BlockTower Capital to Lose $1 Million After Betting Bitcoin Would Hit $50,000 🚨 This article is 6 years old...
BlockTower Capital to Lose $1 Million After Betting Bitcoin Would Hit $50,000
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Updated: Nov. 7, 2019 at 2:53 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
BlockTower Capital, a hedge fund that manages more than $130 million in client assets, made a $1 million bet last year that Bitcoin’s price would go above $50,000 by the end of 2018. The Hedge Fund is expected to lose over $1 million in options by the end of the week.
A Bitcoin Bet Gone Wrong
One of the largest crypto hedge funds in the world, which manages hundreds of millions of dollars in client assets, has made a shocking bet that it’s bound to lose by the end of the year.
BlockTower Capital’s co-founder and current chief information officer, Ari Paul, made a bet on behalf of the company on December 20, 2017, specifying that Bitcoin would be worth more than $50,000 by the end of 2018.
According to Business Insider, the bet would have enabled Paul, who spent just under $1 million on call options, to buy 275 bitcoins at $50,000 apiece any time before December 28, 2018. In total, if the options were exercised BlockTower could have spent up to $13.8 million.
However, with Bitcoin currently trading at around $3,800, it’s safe to say that BlockTower Capital won’t exercise those options.
At the time, the company stood by their decision saying it was a way to “risk a little to win a lot.” During an interview with CNBC on December 26, 2017, Paul said that “it was not a bet that something will happen, but a bet that something could happen,” and that he liked the odds and payout of the move.
Fast forward to December 2018, Paul told Business Insider that they “were not betting on or expecting” a Bitcoin rally. He claimed that the options were a way for the fund to maintain exposure to an extreme rally while reducing overall crypto exposure.
Perhaps Paul’s bet falls into the list of other lackluster 2018 predictions.
Other Crypto Bets Await Resolution
Despite the amount of press they’ve received, BlockTower Capital and Ari Paul aren’t the only ones betting on the future of crypto. Earlier in December, Morgan Creek Digital Assets publicized a bet that the Bitwise index fund of cryptocurrencies would outperform the S&P 500.
Many believe that the bet is a direct challenge to those who see cryptocurrencies as “Ponzi schemes” and believe Bitcoin and other coins will eventually be rendered worthless.
The challenge is as a ‘Buffet Bet’ 2.0, a nod to Warren Buffet’s bet of $1 million that S&P index funds would outperform a selection of actively managed hedge funds. Buffet’s winning bet got him a return with a 7.1 percent interest compounded annually, which is more than three times larger than the 2.2 percent return the selection of hedge funds got.
While BlockTower Capital’s bet is lost, there is still time for Bitcoin’s price to recover in 2019.
Bitcoin Market Data
At the time of press 2:53 am UTC on Nov. 7, 2019, Bitcoin is ranked #1 by market cap and the price is down 0.72% over the past 24 hours. Bitcoin has a market capitalization of $168.59 billion with a 24-hour trading volume of $26.26 billion. Learn more about Bitcoin ›
Crypto Market Summary
At the time of press 2:53 am UTC on Nov. 7, 2019, the total crypto market is valued at at $252.49 billion with a 24-hour volume of $89.68 billion. Bitcoin dominance is currently at 66.79%. Learn more about the crypto market ›
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Bitcoin
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Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
BlockTower Capital
BlockTower is a leading cryptoasset investment firm, applying professional trading, investing and portfolio management to an emerging digital asset class..
Thomas Lee serves as the Managing Partner and the Head of Research at Fundstrat Global Advisors.
Ari Paul is a well-recognized name in the world of finance and cryptocurrency as the co-founder and Chief Investment Officer (CIO) of BlockTower Capital.