If Crypto is Dead, Why Is Yale's Endowment Fund Investing In It?

Even as valuations continue to decline, Yale’s endowment fund is reportedly jumping into the crypto world. A recent Bloomberg report quotes anonymous sources as saying that the University’s endowment has invested in a new cryptocurrency hedge fund started by Coinbase co-founder Fred Ehrsam. Paradigm, the crypto hedge fund in question, is raising $400 million and plans to invest in early-stage blockchain startups, cryptocurrency exchanges, and blockchain technology. 

Yale’s $30 billion endowment fund is the second-largest among academic institutions after Harvard and is headed by David Swensen, often referred to as Yale's "in-house Warren Buffett”. According to the Bloomberg report, 60 percent of Yale’s assets this year are reserved for alternative investments. Both Yale and Paradigm declined to comment for the Bloomberg piece. Yale has also invested in marquee venture capital firm— Andreessen Horowitz’s $300 million fund focused on cryptocurrencies and blockchain. (See also: Bitcoin Price Moves Up After Blackrock Vote Of Confidence). 

Yale’s investments are the latest in a slew of both capital and people making their way into the cryptocurrency space this past week. Earlier, Ric Edelman, founder of one of the biggest independent financial advisories in the country, joined crypto index fund, Bitwise’s board. Brokerage firm TD Ameritrade also announced an investment into ErisX, a new cryptocurrency exchange headed by a former Citi executive. 

The spate of positive news comes amid periods of calm and low volatility for cryptocurrency markets, which have been routed this year. While they are still down by 70% since the start of 2018, crypto valuations have mostly remained steady in the last ten days. This should be good news for institutional players, who generally invest for the long-term and are averse to volatility. (See also: Bitcoin Price History). 

In an interview with CNBC, Blockchain Capital fund co-founder Spencer Bogart termed the past week as one of the best weeks for cryptocurrencies. “These are important building blocks leading to more institutional capital in the crypto space,” he said. While the developments are positive for the long-term health of cryptocurrencies, they did not have much effect on prices for coins. Bogart said the situation was similar to last year when bitcoin’s price continued to rise even after bad news continued to pile up, in the form of critical comments from regulators and experts and scandals. “Now we are seeing the other side of that,” he said, referring to the positive developments this year that have failed to stem price declines in crypto.

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