Hidden Forces

In Episode 32 of Hidden Forces, Demetri Kofinas speaks with Ari Paul about the inner workings of hedge funds focused exclusively on the cryptocurrency space.

Over the course of the last year, cryptocurrency has dominated our society. The price of the most popular digital currencies surged, increasing in value by well over 1000% in a matter of weeks. We saw similar rises in initial coin offerings, with the number of token offerings increasing from just seven a month in January 2017 to more than forty a month by the end of the year.

This crypto euphoria fueled the formation of several cryptocurrency hedge funds which, according to their various founders, aim to bring the professional trading and portfolio management of Wall Street to the emerging class of digital asset. Although this work promises to open the crypto space to an entirely new class of traders, there are many questions regarding how these funds work and how reliable they are. For example, how are crypto fund managers managing risk? What sorts of benchmarks are crypto funds using in order to measure performance? And how does a cryptocurrency investor seek alpha in an already uncorrelated market? To answer these questions, and help shed some light on the emerging world of crypto hedge funds, we turned to Ari Paul.

As a portfolio manager who oversaw risk at the University of Chicago's endowment investment office and the Chief Investment Officer at BlockTower Capital- a leading crypto hedge fund that raised over $140 Million in 2017 - Ari Paul is uniquely qualified to discuss the most interesting and creative investment opportunities for making money in cryptocurrencies. His positioning also means that he is intimately familiar with many of the risk factors that populate this new and fledgling market.

Over the course of the discussion, Ari Paul speaks with host Demetri Kofinas about the skepticism surrounding market values, how we can protect ourselves from counterparty and exchange risk, and how hedge funds like BlockTower Capital are making it easier for someone who may not be intimately familiar with blockchain technologies or the inner working of specific cryptocurrencies, participate in this new digital economy.

Demetri also asks Ari what the benchmarks for crypto funds like Blocktower are and how they measure performance. The challenge in the cryptocurrency space, according to Paul, Is that there are really three benchmarks: bitcoin, cryptocurrencies in general, as well as the broader equity markets. Seeking Alpha in an already uncorrelated asset class, therefore, presents a slew of new risk factors that aren't present for traditional hedge fund managers. Ari Paul also gives his opinion on how the flood of institutional capital might alter these correlations, what a consolidation in cryptocurrencies might look like, and if we are verging near a collapse in valuations.

The two also take a look at cash-settled futures markets, consider the use of put and call options, and explore ways in which investors can better protect themselves from counterparty and exchange risk. Finally, they examine some of the most interesting and creative investment opportunities for making money in cryptocurrencies and what the average investor can do in order to take advantage of them.

Producer & Host: Demetri Kofinas

Editor & Engineer: Stylianos Nicolaou

Join the conversation at @hiddenforcespod

In this Market Forces segment, Demetri speaks with Ben Friedland, Vice Chairman & Co-Head of Alternative Investments Practice for CBRE, the largest commercial real estate services and investment firm in the world. Ben advises the world’s top hedge funds and PE companies regarding real estate investments, leases, and acquisitions, and is in a unique position to provide insight into how the forces of technology and globalization are changing this age-old, multi-trillion-dollar industry in the 21st century.

In Episode 31 of Hidden Forces, host Demetri Kofinas speaks with Chris Burniske about how to value a cryptocurrency. Chris is a co-founder of Placeholder, a New York venture firm that specializes in cryptoassets. Before Placeholder, Chris Burniske pioneered ARK Invest's Next Generation Internet strategy, leading the company to become the first public fund manager to invest in cryptocurrency. He then transitioned to focus exclusively on cryptoassets, paving the way for Wall Street to recognize it as a new asset class. His commentary has been featured on national media outlets, including the Wall Street Journal, the New York Times, Fortune, and Forbes.

With the total market capitalization of all cryptocurrency having surpassed $800 billion by the start of 2018, it was only a matter of time before Wall Street would stand up and take notice. The establishment of a cash-settled futures market for bitcoin in late 2017 is one of many bullish signs for the long-term viability of cryptoassets. It has also opened the door to further institutional capital and crypto-focused hedge funds with hundreds of millions of dollars to deploy. The opportunities for profitmaking are too lucrative to ignore, but the flood of institutional and private capital into the cryptocurrency space is also fueling a speculative mania. The newness of this asset class and its lack of historical price data make proper valuations even more challenging. So, given these constraints, the question remains, how do you value cryptocurrency?

The answer lies at the intersection of macroeconomics and financial modeling. Chris Burniske and Demetri Kofinas start by laying out a taxonomy for cryptoassets that breaks them into three categories: cryptocurrency, cryptocommodities, and cryptotokens. In their conversation, they explore how one can learn to differentiate between the different currencies, DApps, and tokens. How does one judge the merits of a white paper, the seriousness of the dev team, and the enthusiasm of early adopters? How important is governance? How can volatility in the underlying token impact the robustness of the software? How do supply schedules determine future values? What are some of the most reliable, early indicators of success or failure for a cryptoventure? These are just some of the questions that Demetri and Chris address in this highly informative and timely conversation.

Producer & Host: Demetri Kofinas

Editor & Engineer: Stylianos Nicolaou

Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod

In Episode 30 of Hidden Forces, Demetri Kofinas asks the question, "how can we learn how to predict the future?" According to his guest, Tim O'Reilly, learning how to predict the future starts with building better maps.

Tim O'Reilly has played a seminal role in creating the framework through which an entire generation has come to know and understand the modern Internet. If you have ever used terms like "open source" or "web 2.0," you are relying on the language cultivated by Tim O'Reilly, through his innumerable conferences, gatherings, and intimate conversations. His work has reshaped how people in the computer industry think about technology. He is the founder, CEO, and Chairman of O'Reilly Media, and his most recent book, WTF: What's the Future and Why It's Up to Us, forms the basis for much of this conversation.

The need to explore is a fundamental driver of human progress. Without it, we would never have ventured off the plains of Africa, conquered the seas, or landed men on the moon. How has humanity managed to navigate the unknown? The process of exploration is one of mapmaking. Maps are not some relics of a bygone era. Maps are not artifacts that exist naturally in the world. Maps are products of the human mind. Mapmaking is the process through which our brains structure time and space; they help us put order around experience. Maps are the expression of human perception. If we want to navigate the world better, and if we want to learn how to predict the future, then we need to build better maps. Tim O'Reilly helps us do just that.

Producer & Host: Demetri Kofinas

Editor & Engineer: Stylianos Nicolaou

Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod

In this Crypto Forces segment of Hidden Forces, Demetri Kofinas speaks with Mark DiMichael, a Forensic Accountant with Citrin Cooperman, who specializes in the tax implications for cryptocurrencies.

What are the filing requirements for anyone who has profited from, transacted in, or mined a cryptocurrency in the last 9 years? What is a 1031 like-kind exchange, and do cryptocurrencies qualify for this tax exemption? Does each bitcoin transaction qualify as a taxable event? Do governments tax protocol tokens like BTC differently from utility tokens? How will the gains made as a result of forks like that of bitcoin and bitcoin cash, be taxed by governments? Lastly, are there any exemptions or other legal ways to avoid paying taxes on gains made in bitcoin, ethereum, or other cryptocurrencies?

Producer & Host: Demetri Kofinas

Editor & Engineer: Stylianos Nicolaou

Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod

In Episode 29 of Hidden Forces, Demetri Kofinas speaks with Hooman Majd about how to interpret the Iranian protests within the wider political, cultural, and financial dimensions of the greater Middle East.

The ongoing Iranian protests have delivered the worst scenes of unrest since millions took to the streets over a disputed presidential election in 2009. During the tensions that occurred a decade ago, protesters claimed that widespread election fraud resulted in the state erroneously reelecting Mahmoud Ahmadinejad, as president of Iran; however, the most recent protests are about far more than an election — and it is about far more than just Iran.

Although many reports have noted that the protests were triggered by growing anger stemming from economic hardships, such as increasing unemployment and income inequality, the root cause of the unrest goes far deeper. The unrest in Iran cannot be entirely separated from the larger forces moving through the Middle East. In order to understand the nature and scope of the present problem, we need to consider the socioeconomic and political forces operating in both Iran and the Middle East at large. Few are better equipped to discuss this topic than Hooman Majd.

Hooman Majd is an Iranian-American writer and political commentator. He is the author of the New York Times bestseller The Ayatollah Begs to Differ, as well as The Ayatollahs' Democracy and The Ministry of Guidance Invites You to Not Stay. He joins us today to discuss how we can interpret and locate the Iranian protests within the wider political, cultural, and financial dimensions of the Middle East.

Over the course of the conversation, Hooman Majd and host Demetri Kofinas discuss how the Iranian protests fit within the western-oriented framework of thinking about Iran, and how much of what Iran is experiencing is the result of forces that are reshaping the oil-reliant and politically volatile economies of the region.

Ultimately, the conversation investigates the source of the ongoing protests, and what these demonstrations express about the current state of Iranian society, its economy, and its politics, in order to provide a framework for understanding the larger forces operating across the Middle East.

Producer & Host: Demetri Kofinas Editor & Engineer: Stylianos Nicolaou

Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod

In Episode 28 of Hidden Forces, host Demetri Kofinas lays out his vision for a future driven by the emergent forces we have been covering in 2017. He reads passages from Ted Kaczynski's "Industrial Society and its Future," as well as from Bill Joy's "Why the Future Doesn't Need Us." He plays clips from interviews with Barack Obama, Tim Cook, and Jamie Dimon, as he considers how power, privacy, and control, all factor into the emerging technological landscape.

What is the goal of the machine? What do we seek to accomplish with our technologies? What are the benefits and the costs associated with the technological, political, and economic forces of the modern age?

Producer & Host: Demetri Kofinas Editor: Stylianos Nicolaou

Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod

In this Christmas Day release of Hidden Forces, Demetri Kofinas addresses questions related to a documentary released by Mike Maloney about hashgraph and the promise of distributed ledger technology. 

Demetri was featured prominently in Part 2 of the documentary, which included reference to the Hashgraph Founders panel put together by Hidden Forces in early-to-mid October of 2017.

How can a patented consensus algorithm replace an open-source blockchain protocol? How do the problems of governance and the politics of census factor into the thinking of the hashgraph team? How can hashgraph (currently, operating only in permissioned networks) be reasonably compared to public blockchain networks like ethereum or bitcoin? 

Demetri also shares his thoughts on bitcoin, its uninspiring value proposition, and the mania around cryptocurrencies, altcoins, and ICO's. 

Producer & Host: Demetri Kofinas Editor & Engineer: Stylianos Nicolaou

Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod

In Episode 27 of Hidden Forces, Demetri Kofinas speaks with economist Gary Shilling, who famously called the bottom in what has become a 36-year bull market in US Treasuries, about the ramifications of Donald Trump's economic policies, the role of cryptocurrencies, and the prospect for stocks, commodities, and the dollar in 2018.

Few would reasonably argue that regulatory reform is not needed in the United States. The issue for politicians and policymakers has always been one of balance and practicality. The turbulence of the 1970's produced a slew of regulatory measures like wage and price controls that proved disastrous for the economy. Likewise, the financial deregulation of the 1980s and 1990s rolled back investor protections that had served to safeguard customer deposits and prevent excessive interconnectivity in the banking system.

In the context of the current economic expansion, one must consider the impact that deregulation and higher after-tax income will have on an economy already in its ninth year of economic expansion. With corporations and businesses standing to benefit most from tax cuts proposed by Senate and House Republicans, what do individual tax-filers stand to gain from the Trump tax plan? Are there benefits to rolling back some of the financial regulations passed in reaction to the fallout of the great financial crisis of 2008? What does the employment picture look like for the US economy? How do job prospects and wages fare in the face of rising asset values and growing debt burdens? If Gary Shilling is right and treasuries remain in a bull market, what does this mean for the fate of stocks, commodities, and the US dollar in 2018? Will the price of oil continue its recent rise, or may some combination of weak demand and oversupply hamper prices? How will the Federal Reserve's ongoing tightening affect the economy and are we destined to see an inversion of the yield curve for 10-year US Treasuries? Gary Shilling also gives us his two cents on bitcoin, and why he thinks the cryptocurrency is massively overvalued.

Producer & Host: Demetri Kofinas

Editor & Engineer: Stylianos Nicolaou

Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod

In Episode 26 of Hidden Forces, host Demetri Kofinas speaks with NASA's Chief Climate Scientist and Head of the Goddard Institute for Space Studies, Gavin Schmidt. The two cut through the controversy surrounding climate change and dive right into the heart of climate science. They parse through the data, explore the climate models, and consider the impact that further warming could have on humanity in the decades to come.

What is driving the warming of our planet? What is causing the acidification of the oceans? What is shrinking the ice sheets? What is causing the rise in sea levels, the decrease in snow cover, and the melting glaciers? Is there a causal connection between human activity and the prolonged droughts, intense heat waves, and raging wildfires we have seen in recent years? What are the feedback mechanisms of climate change? How do we measure the impact of losing reflective layers of ice, exposing permafrost, or releasing vapor into the atmosphere? What does the cooling of the upper atmosphere tell us about the cause of global warming? Could changes in solar activity, sunspots and cosmic rays, and their effects on clouds be to blame for climate change? How will humanity respond to more extreme weather events – hurricanes, droughts, floods, and forest fires – as our populations grow and the density of our coastal regions increases? And is there anything we can do, to prepare?

Producer & Host: Demetri Kofinas Editor & Engineer: Stylianos Nicolaou

Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod