High Frequency Trading Firms Have 'Highest Bitcoin Affinity', Analyst Argues

Su Zhu, the co-founder of Sensus Markets, a digital asset principal trading firm, has argued that companies focused on high-frequency trading (HFT), small family investment offices, and hedge funds have the “highest Bitcoin affinity.”

Zhu, who is also the CEO of Three Arrows Capital, a foreign exchange (FX) focused hedge fund, posted (via Twitter) a “ranking of Bitcoin affinity in the traditional financial space, from highest to lowest:”

  • “HFT/prop firms”,
  • “Service providers”,
  • “Family offices”,
  • “Hedge funds”,
  • “Stock/futures exchanges”,
  • “Private banks”,
  • “Commercial banks”,
  • “Investment banks”,
  • “Academia.”

The Role Of "Incentives And Philosophy"

According to Zhu, “incentives and philosophy play a big role” in influencing the decisions and overall approach organizations take towards adopting new technologies - including Bitcoin (BTC) and other cryptocurrencies.

In response to Zhu’s comments, Gabor Gurbacs, the digital asset strategist and director at VanEck, a New York-based financial services firm, remarked (via Twitter):

Asset managers are missing from the list. I’d highlight that banks and asset managers would be higher on the list if the regulatory environment was more permissive. Today, the least regulated entities are on the top of the list and most regulated on the bottom.

According to Gurbacs: “Academia is confused which side to support. (traditional vs crypto) Eventually, they will support whoever pays more to the universities. It’s an incentive question to academia, as it has been for too long.”

Top Universities Invest Small Amounts In Crypto

On February 19th, 2019, the University of Michigan announced that it had decided to invest more in cryptoasset-related funds. Backed by leading venture capital firm, Andreessen Horowitz, University of Michigan’s initial $3 million investment in a crypto network fund called CNK Fund I L.P. has now been increased.

Although the University of Michigan may have invested a substantial amount in cryptos, the (total) value of its financial endowment fund is estimated at over $11.9 billion. Clearly, crypto investments still make a very small percentage of the University of Michigan’s total assets. Moreover, Yale University has also invested in Andreessen Horowitz’s $300 million crypto fund. However, cryptos also make up a relatively small percentage of Yale University’s $25.4 billion endowment fund.

On February 24th, Gurbacs recommended to his followers (via Twitter): 

If you are chasing the price of #bitcoin, you are in it for the wrong reason and you probably shouldn’t own any #BTC. I highlight a few attributes of #Bitcoin that are far more important than price. (especially if you have low time preference)