Recently, CNBC’s “Crypto Trader”, Ran NeuNer interviewee Tushar Jain, the managing partner of crypto hedge fund Multicoin Capital. This article looks at the highlights from this interview (the full video is available on YouTube).

Ran: “How are you guys trading this dip in the market?”

Tushar: “Crypto could be quite volatile, and sometimes it is best to do nothing. So, we are actually not actively trading at the moment. We were well-positioned a few months ago, and we are really looking at this as risk management right now. We don’t know where this bear market ends. I don’t think anyone does… Right now, there is a high probability of the market continuing to fall, and so I kind of want to stay out of the market… at least, be risk-neutral… It is important to understand how to think about risk. There’s broadly two categories of risk. There’s idiosyncratic risk and there’s systemic risk, or market risk. So, idiosyncratic risk is risk that is specific to one asset. So, Ethereum has idiosyncratic risk in terms of scaling problems… Systemic risk is the whole market could continue going down. And seeing how correlated the whole market is, systemic risk is a very important part of the risk. So, when I say risk-neutral, what I really mean is we want to be neutral on systemic risk… we are willing to take on idiosyncratic risk.”

Ran: “So, let’s talk about specific trades that you are doing to take on that risk.”

Tushar: “An example of that would be short Litecoin, long Bitcoin, in equal amounts. The reason why I would call this trade systemic risk neutral is that if the whole market moves together, up or down, that trade will not be exposed to the market movements. However, if we right on our idiosyncratic thesis that Bitcoin has a stronger value proposition than Litecoin, which is just a glorified testnet… literally, no-one I have talked to can give me a reason why Litecoin needs to be worth anything.”

Ran: “So, you are saying that Litecoin, in your view, is a $5 billion testnet for Bitcoin?”

Tushar: “Yes, and it should be worth far less than that… should be worth less than a tenth.”

Ran: “So, you are saying if you are short Litecoin and you are long Bitcoin, if the market goes down, then Litecoin will go down quicker than Bitcoin will go down. If the market goes up, then Bitcoin will lead the rally.”

Tushar: “That’s my expectation… yes.”

Ran: “Are you a utility token bull?”

Tushar: “So, we are really focused on investing in native tokens of smart contract platforms, and the reason for that is that we think assets become money by being used as money, because it reinforces the story that this thing is money. So, that’s number one. Number two is that there will be a lot of crypto native use cases, things like gaming or prediction markets.”

Ran: “Which are your favorite protocols today?”

Tushar: “Ethereum, I’ve always thought, was a fantastic protocol… I think the Ethereum network is one of the most amazing things that humanity has actually ever created… I am a big fan of EOS… I think EOS is running some really interesting experiments… For me the most compelling piece about EOS is the huge design space it opens up that was just never possible before.”