Endowments Finally Investing in Crypto

More than a year ago Ted Seides shared why endowments should venture into crypto.

Yet new ideas inevitably enter the mainstream. Diversification into global equities, absolute-return strategies, and private equity were all once off limits to institutions, only to become common practice.

The mechanism for their adoption follows a recurring pattern. Early adopters tend to be high-net-worth family offices and individuals who can take risk on their capital without risking their careers. When the investments prove fruitful, those individuals encourage the boards on which they serve to investigate the areas. Early institutional movers with credibility and support from their boards then dip their toes in the water. If those early allocations are successful, word eventually gets out broadly, offering support for those with more rigid requirements to put big dollars to work. 

When Will Yale Buy Bitcoin?, Institutional Investor

Although hesitant at first, many of the top endowments have begun to explore it.

Most institutional money managers have shunned the largely unregulated digital assets, deterred by concerns about money laundering and market manipulation. While some argue crypto is not ready for institutional prime time, crypto bulls have been hoping deep-pocketed buyers enter the market to help depressed prices rally.

Harvard Takes the Plunge Into Crypto With a Token Sale Investment, Bloomberg

A number of schools are now making crypto investments.

Report reveals that Yale invests in cryptocurrency, Yale Daily News

Michigan Endowment Dips Toe into Crypto Pool, Chief Investment Officer

Harvard Invests Millions in New Cryptocurrency, The Harvard Crimson

But there is much to be settled before larger institutional investors follow suit.

Miners secure the network for a cryptocurrency, maintaining its infrastructure – its blockchain – by solving a series of complex computational problems necessary to string together transactions in clusters, or “blocks”, which constitute the “chain”. This is what makes cryptocurrencies comparatively decentralised and also theoretically impossible to hack. For their algorithmic chiseling, miners are rewarded with cryptocurrency coins.

In order to keep the rate of coins entering the market steady, the mining process has been designed to grow more difficult and electricity-consuming as the overall computational capacity devoted to mining increases. Therefore, already a few years after Bitcoin’s launch in 2009, mining operations started moving out of bedrooms and desktop computers running small processing units, to giant warehouse facilities with tens of thousands of machines, elaborate cooling units to stop them overheating, teams of engineers working around the clock to make sure none of the mining rigs go offline, and management teams working on logistics and smoothing the relationships with local power suppliers.

In China, bitcoin mining moguls are scrambling to survive, Wired UK

Mining is an apt metaphor considering how much energy it consumes.

Post by Marcelino Pantoja