Early this week my colleague Danny Nelson reported that billionaire investor and author Ray Dalio’s Bridgewater hedge fund, one of the largest and most influential capital managers in the world, may be gaining exposure to crypto. This is a significant advance on one of the “narratives” that many industry commentators think will lead to the “mass adoption” of crypto assets: Institutions will lead the way.
Essentially, ever since crypto was first created (god bless you, Mr. or Ms. Nakamoto), people have said that “the institutions are coming,” and that the influx of capital from banks, money managers and the like will send token prices skyward. Indeed, this hypothesis was in part proven true over the course of the coronavirus pandemic: Publicly traded corporations began putting bitcoin (BTC) on their balance sheets, banks started offering crypto exposure to clients and so on – and crypto prices moved up and to the right on the charts.
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CoinDesk podcaster Nathaniel Whittemore recently offered a different, compelling take: Institutional adoption is already here, and Bridgewater’s unconfirmed exposure simply represents this new “post-narrative institutionalization.” “What I mean by that is that this institutional entry into the market – TradFi coming in – is no longer the narrative driving crypto markets. It's simply a fact of reality,” Whittemore said.
I largely agree with Whittemore that we’re in a new growth cycle of crypto adoption. It’s just a matter of fact that big banks, nation-states and the billionaire class are getting clearer on the basics and potential benefits of crypto, and in some cases embracing it. But I’d offer a caveat to this thesis. “Mass adoption” is hardly assured, and crypto will likely remain a fringe asset class. In fact, that might be better for all involved.
Crypto is a set of protocols, tools and assets that allow for social, monetary and infrastructural networks to route around “middlemen.” Bitcoin allows the transfer of a novel type of digital currency to be sent peer-to-peer. Ethereum and other smart contract blockchains allow developers to write apps that run any number of computer programs.
If done correctly, blockchains offer particular benefits over traditional financial and internet architectures; namely, if they are decentralized, the flow of money and information is resistant to tampering (read: censorship). They are further, theoretically, accessible to anyone, run all-day and may even provide the possibility of pseudonymity. (Though, there are serious challenges there.)
None of those attributes are absolutely necessary for financial or data systems to run effectively. And they come with trade-offs, like limited transaction throughput and steep energy bills. In wider society, many still look at crypto as an experiment, and an increasing number of people are skeptical of the industry’s claims or even the need for token-based markets at all.
In short, there’s a conflict between whether crypto is this world-historical vehicle for techno-economico change across industries – (everywhere there’s market inefficiencies, a token could thrive) – and crypto’s position as a marginal asset class. We still don’t know where it’ll all land. But one thing is sure, crypto is thriving on the fringe.
Sigma male grindset
It’s not a stretch of the imagination to say that people, especially those who spend a lot of time online, gravitate towards group identification. We all like to signal our relationship to certain causes or identities. (See the perennially popular Buzzfeed lists, the quick adoption of neologisms like “wordcels” or “shape rotators,” niche subreddits.)
“Sigma male” is one of the newer ways for people to self-identify. It’s a term that supposedly, somewhat-ironically, describes people that “operate outside of social systems and hierarchies,” according to Dazed. They’re the lone wolves of the world. They’re motivated by internal desires, rather than social acceptance. They’ve always existed, but some of the clearest examples come from the social media age.
Serial investor Gary Vaynerchuk is perhaps the archetypical “sigma male.” He cosigns a worldview where friends, family and personal enrichment ought to be sidelined for a singular pursuit of profit and success. His life’s desire, reportedly, is to own the New York Jets U.S. professional football team. He has a unique ability to “translate the strange, technical language of finance and investing into something that is accessible and entertaining,” which has won him the appraisal of many Gen Z social media users.
The “self-made” soprano with a penchant for cursing represents a real trend of people that “rise and grind,” or put all of their energy into work. They’re the type of social-media investor that might recommend putting you “entire pension … into this three-times levered zinc-futures ETF today,” as Bloomberg columnist Paul J. Davies wrote.
Lately, crypto has become a key component of this “grindset.” It offers a risky way for people to build “generational wealth,” and rewards those who do their “own research.” Of course, Vaynerchuk is big on crypto – particularly NFTs (or non-fungible tokens that add a price and a way to track pieces of digital media). He’s called CryptoPunks the “next Facebook,” a company in which he was early to invest.
I’m just scratching the surface here on the “sigma male grindset.” One particular trend seems to capture its perils best, that memes of Patrick Bateman, the archetypical fictionalized portrait of 1980s greed and vanity in “American Psycho,” have been recuperated as a positive example of what grinding can bring. Apparently, zoomers aren’t “in on the joke,” but they’re also pretty hard to read.
There are many things that separate Dalio from Vaynerchuk. They operate in different leagues. Vaynerchuk appeals to retail investors while Dalio deals with mega-corps and nation-states. They’re focused on different levers of socio-economic change: Vaynerchuk sees the internet as the prime mover reshaping the world while Dalio looks to oil and greenbacks.
Dalio runs a hedge fund with a product called “Pure Alpha”(referring to “alpha,” or the rate of return you can earn above normal markets), but the man is pure “sigma.” He advocates for consistent self-improvement, for a rational outlook on reality and has implemented procedures at Bridgewater where all meetings are filmed to be reviewed and notated on later. Although there is a Bridgewater c-suite, with Dalio at top, all employees are encouraged to second-guess and pushback on their superiors and inferiors work.
Last year, I wrote about “Wall Street’s oddest duck” ahead of his keynote speech at Consensus (buy tickets for this year’s festival in Austin, by the way), where I noted that his theory about the “changing world order” aligns pretty well with bitcoiners. At that conference he announced he preferred bitcoin over “bonds.”
And now, it appears, he’s steering his company to examine crypto more closely. Bridgewater might be said to be moving slowly here – as mentioned, many hedge funds have already allocated to bitcoin. So is the latest news an indication of the “post-narrative institutionalization” of crypto? Or just the latest example of crypto thriving on the sidelines?
UPDATE (MAR. 25, 2022 – 12:25 UTC): Corrects spelling of Vaynerchuk twice.