Today’s episode is from a 2018 conversation with Ari Nazir, founder and managing partner at Neural Capital, a hedge fund focused on cryptoassets. We discuss how he manages his portfolio in a space that is still marked by speculation and dishonesty. For the full conversation, check out Flippening episode 13.
Links Relevant To This Episode
- Nomics on Twitter
- Clay Collins
- Nomics API
- Nomics’ Fully Customizable Daily Crypto Newsletter
- Ari Nazir
- Neural Capital
- Ethereum (ETH)
- Stellar (XLM)
- EOS (EOS)
- Centra (CTR)
- Bitconnect (BCC)
Clay: Welcome to Daily Wisdom from the Flippening Podcast. These episodes feature short, to the point clips from our full-length interviews. We talk to the men and women behind the trades, crypto exchanges, and regulations with the goal of helping you become a better, more informed investor.
Michael: Hi, I’m Michael Kaplan, editor of the Flippening Podcast. Today’s episode is from a 2018 conversation with Ari Nazir, founder and managing partner at Neural Capital, a hedge fund focused on cryptoassets. We discuss how he manages his portfolio in a space that is still marked by speculation and dishonesty. For the full conversation, [00:00:30] check out Flippening episode 13.
Without further ado, here’s our conversation with Ari Nazir, founder and managing partner at Neural Capital. Enjoy.
Ari: As we start seeing a flight to quality, not just in terms of capital, that’s the first thing anybody thinks of. More importantly, flight to capital of developers. Once you start seeing more talent around platforms, you start seeing the winners emerge, whether it’s Ethereum, Stellar, EOS, a number of them combined, the taking [00:01:00] of specific market share for specific activities, I think you’ll start seeing more and more developers. But to answer your question, I see myself still today in the financial services, venture capital space, but I like to think of myself as a wealth generator and not necessarily a wealth manager.
Clay: Most people would rather have wealth generated for them rather than managed.
Ari: That’s our pitch.
Clay: There’s actually an interesting transition point here. You talked about being on what sounded like a VC [00:01:30] track trajectory, but Neural Capital, from my understanding, takes a sentiment or a momentum investing based approach which in a lot of ways sounds antithetical or an alternative way of doing things, compared to what VCs do. VCs get on planes, they talk to teams, it’s really about like you know what’s the TAM, SAM, SOM? What’s the market size? Maybe looks [00:02:00] a little bit more like value investing than sentiment, but in a lot of ways is about front-running what large groups of people are likely to do in the future based on current indicators.
How do you think about the juxtaposition between maybe the track you were on and what you are doing now? Or are they more similar than one might think?
Ari: You’re directionally correct. This is a really good question and not one I get asked often enough. What I’m doing is venture capital [00:02:30] with additional liquidity and the ability to not have to commit to a project for five to seven years at a time. If you talk to the average venture capitalist in Silicon Valley, off the record I’m sure over half of them would tell you, “Yeah I wish I could have sold my chunk in that company two years in when they had that acquisition offer,” or, “I wish I could have sold it when they raised their next round.” A lot of people don’t have an opportunity to do that or they can’t do that for signaling risk to the entrepreneur or for a number of reasons. At the very least, most venture capitalists would love to take the principal [00:03:00] off the table whenever there’s a subsequent route.
I do what I do as partially buy-and-hold. I think it’s level set, let’s talk about what our strategy is broadly. Part of our portfolio is buy-and-hold and so that’s in cryptocurrencies and digital assets that we think over a few year period will appreciate in value.
Then, there is a very active sentiment-driven model which is about half of the portfolio which says over the next two weeks, over the next month [00:03:30] or the next six months, this is how we think the space will evolve, and these are the assets that we’re more bullish on relative to all the other assets that we could possibly trade or invest in. I’ll dig into that in a bit.
The last part is more discretionary in certain timeframes that become governance and masternode-driven. It really comes down to a more passive strategy to start balancing out the more active strategy, just to make sure that in a drawdown or if like we make a couple bad trades in a row we don’t get left with a terrible [00:04:00] month or quarter for the rest of the fund. It’s more of a diversity of like our own theses to just hedge our portfolio.
Within that buy-and-hold, a small component of that is initial coin offerings. We don’t really do initial coin offerings, we never have. Part of the reason for that actually was given that I have at least a semblance of a regulatory perspective on the space, most of these ICOs are illegal money services businesses. I know we talked about them being potential securities and or non-securities from day one, I thought the entire utility model [00:04:30] was a farce created by lawyers to appease clients.
I’m not trying to assign blame but it’s pretty clear that the utility token model structure isn’t going to stand up to scrutiny, 100% of the time. I think you’ll find out that most of these were illicit securities that raised, I’m not just talking about the obvious scams like Centra coin or Bitconnect, even some of the more sophisticated tokens that can make a pitch for utility tokens. People are buying ultimately or viewing them not as a utility [00:05:00] to access the platform but thinking of them as a security because they are looking for price appreciation and they view that as de facto equity in the company.
For those reasons, and obviously, the bubble that ended up emerging just like the pre-sell bubble and the reselling downstream to other people, just all of that. There are a couple reasons why we stayed away from ICOs but we’ll do really interesting projects like certain stablecoins if the economics make sense or if we see a trend that we’re really interested in and we buy in early enough. [00:05:30] Or if it’s an advisor to a fund that heavily recommends a particular project.
To get back to the active trading part, I’m looking at indicators, whether it’s on social media, whether it’s technical analysis of actual charts and then trading on preset timelines. Over the weekend we did one trade that started Thursday morning and I closed part of it on Saturday and then the rest of it this morning. That was less than a week but it was preset [00:06:00] levels of, “Hey, this is the price we’re getting in at, this is the price we’re getting out at. Ideally, we see this happening in the next few weeks, if it happens sooner, we’ll act even quicker.”
Clay: That’s it for today. If you like what you heard and want to support the show, please consider leaving us a review on iTunes, Stitcher, or wherever you listen to podcasts. If you decide to leave us a review after subscribing, we’ll send you a free Nomics T-shirt. Just hit us up on Twitter @NomicsFinance after you’ve left a review and we’ll hook you up. [00:06:30] You may also be interested in nomics.com, our crypto market cap and pricing website, check us out at nomics.com. Now, stick around for our legal disclaimer.
All opinions expressed by podcast hosts or guests are solely their own opinion and do not reflect the opinion of Nomics or any other company. This podcast is for informational and entertainment purposes only and should not be [00:06:30] relied upon as the basis for investment decisions.
The producers, hosts, and guests of the show may maintain positions in the companies or assets discussed today.