Daniel Loeb's $17B Hedge Fund Is Keeping Crypto With Coinbase – And Maybe Even Staking It

Third Point is the latest institutional stalwart to be revealed as a client of Coinbase Custody.

Apr 9, 2021 at 7:13 p.m. UTC
Updated Sep 14, 2021 at 12:38 p.m. UTC

Billionaire investor Daniel Loeb’s “deep dive into crypto” last month led his $17.6 billion hedge fund to a familiar place: a custody deal with Coinbase.

Loeb’s Third Point LLC now holds cryptocurrency from five of its funds with Coinbase, according to regulatory documents obtained by CoinDesk. Some tout billions of dollars in underlying assets, but it is not clear how much of that is in crypto, which assets, or for how long they’ve invested.

With less than a week to go before Coinbase’s Nasdaq debut, the custody tie-up underscores how Brian Armstrong’s nine-year-old firm has transformed itself from a bitcoin-only digital wallet into a massive vault for Wall Street’s crypto bets.

Coinbase revealed it held $122 billion in institutional assets during this week's voluntary earnings call. It expects “meaningful growth” driven in part by custody revenue in the year ahead.

CoinDesk reported earlier this week that fellow hedge fund titan Paul Tudor Jones is also a Coinbase client, offering a glimpse at the deep-pocketed investors behind the exchange’s institutional assets under management.

Third Point did not respond to CoinDesk by press time.

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Click the image for CoinDesk's full coverage of the Coinbase public listing.

‘Deep dive’

The hedge fund’s true exposure to crypto assets remains more opaque. In a brochure accompanying the March 31 filings, Third Point said it can invest directly in cryptos or indirectly through derivatives contracts.  

Notably, it is open to staking and lending any cryptos as well, the documents say.

“This is the first big traditional hedge fund that I know of that is doing staking,'' said Tim Ogilvie, who runs a company called Staked that provides staking services to institutional investors, after reviewing the documents.

“On the one hand I'm surprised. On the other hand I'm not surprised,” he added. “If you want to hold a crypto asset that is proof-of-stake I think you have a fiduciary responsibility to stake.”

Proof-of-stake blockchains like Tezos, Cosmos, Solana and others reward token holders with payouts akin to interest for securing the network with their contributed holdings. 

Institutional investors are slowly waking up to staking, Ogilvie said. With staking there are two gains generators: the token price and the staking payout. It’s a guaranteed reward on top of a speculative bet. Ogilvie said there are $4.5 billion in crypto assets on Staked.

Third Point invests

Loeb has never publicly disclosed his crypto holdings. But he began to toy – at least publicly – with the asset class in an early-March tweet.

Third Point’s own foray into crypto likely started well before. In mid-March the asset manager revealed it is backing crypto exchange eToro, which, like Coinbase, is gearing up for a Nasdaq debut.

eToro’s SPAC deal (it is going public through a merger with FinTech Acquisition Corp. V, or FTCV) gave Third Point and Loeb an opportunity to invest. 

They did: Loeb now holds 3 million shares, or more than 10%, of FTCV, worth nearly $43 million on Friday, according to filings.

UPDATE (April 9, 21:05 UTC): Loeb appeared to confirm that he holds crypto in a tweet citing this story after publication.

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