Timothy Tam

Former hedge fund trader Timothy Tam is betting his career on blockchain.

Last year, Tam, along with Han Chang and Nate Tsang, launched CoinFi, which provides cryptocurrency news, analysis, research and “Wall Street caliber tools,” including trading algorithms and automated trading bots.

When Tam began trading cryptocurrencies in late 2016, he saw there could be a huge demand for these resources in one user-friendly place. “The tools that I was used to trading with on Wall Street didn’t exist in the crypto space,” he told ThirtyK. “I was doing everything manually. I was looking at my pricing on Google sheets instead of on proper systems.”

Tam started his career as an analyst with Goldman Sachs and later spent nearly a decade at three Asia-focused hedge funds, the first two as a senior trader and the third as a founding partner. He takes a long-range view of blockchain and cryptocurrency, likening the industry’s volatility to the dot-com boom, which had its own well-documented peaks and valleys. “It’s clear that blockchain, the concept of decentralization is here to stay,” he said. “If you take a 10- [to] 20-year view, things will work out like they did from 1997 to 2016.”

ThirtyK: Was the newness of crypto what attracted you?

Tam: It’s the birth of a new asset class. There is a huge opportunity to build all this ecosystem software and tools that is taken for granted on Wall Street. That’s what excited me. I’ve been through enough cycles. That is why I have high conviction. Having said that, it is going to be volatile.

ThirtyK: Does the volatility give you pause?

Tam: One: People at this early cycle should not invest more money than they are willing to lose. If you’re willing to stomach that volatility and are there for the long term, you can come out well ahead. When assets correct, it’s a better buying opportunity. No. 2: Volatility is generally more of a concern if you don’t have conviction in a trade. I have a structural, long-term belief in this asset class.

ThirtyK: What are the historical parallels?

Tam: Amazon went up a lot in the dot-com boom. At the end of the dot-com crash, it dropped about 90 percent, and it doesn’t mean that Amazon was not a good business. You see a lot of this same view in the crypto markets. Is crypto legitimate? In the dot-com crash, people were saying, “There’s no way that people will buy stuff online.” Twenty years later, it’s proven that the business is sound. That’s reflective of early-stage cycles that have always been volatile.

“These opportunities come once every 20 or 30 years, and if you catch the early trend you can build a great business and provide value.”

Greed and Fear

ThirtyK: We sometimes forget nascent-stage issues.

Tam: Pricing, if you look by a month-by-month, year-by-year basis, is a function of greed and fear, supply and demand of buys and sells in the market. It’s short term.

ThirtyK: Reality sets in.

Tam: It is euphoria that carries prices above where they should be, and then they fall back. What is the price of these assets and how to value them?

ThirtyK: So you are comfortable with the risk.

Tam: I’ve bet my career and a substantial amount of net worth on this. These opportunities come once every 20 or 30 years, and if you catch the early trend you can build a great business and provide value. We have a great opportunity to grow market share and to be the go-to market platform for all crypto traders. The worst thing is I build a business and the sector turns down my view as wrong. But I diversify my risk. If I lose, I still have capital to try something else. The danger is when traders overleverage.

ThirtyK: What was the nature of your hedge funds?

Tam: They were traditional long short. I’ve always been in the long-short space where you had long and short bets.

CoinFi Origins

ThirtyK: What were the origins of CoinFi and what was the gap in instruments that you were witnessing?

Tam: When I was trading, I wanted to monitor different pieces of news on coins that I held in my portfolio. Literally, I’d see the price up 30 percent and have no idea why it moved until I dug around on Reddit or things like that.

The first thing we developed was CoinFi News, which picks and aggregates the different crypto news sources on the web into one area. You can click onto any coin and see all the recent news that is related to that coin. As a trader, that is important because you want to know if a coin is up 30 [to] 40 percent, what’s the news that’s moved it. We use machine learning algorithms to identify news that’s causing the price movement.

ThirtyK: What else would you highlight from CoinFi?

Tam: Our data science team has input all the Ethereum transactions, all the ERC-20 tokens. We are in the process of running analytic reports on that data. On a particular token, when there is a wallet movement of $50 million, that’s interesting because you can correlate that to price movement to see if there is any pattern.

ThirtyK: How long until we see a deeper embrace of crypto by institutional investors?

Tam: The expectation has been a fast embrace. But I’ve always said that’s not realistic. There are fundamental structural things that need to get resolved before you can scale in size, like tighter regulation on exchanges that are trading higher volume. The broader crypto market trades between $10 billion to $15 billion a day. That is still small in perspective to bonds, equities, [foreign exchange], but it is large enough for institutions to get involved. There’s a huge influx of talent to the industry. Wherever you have all the brains go in, all the difficult problems get solved. It’s a bullish sign.

ThirtyK: Do retail investors understand the risk?

Tam: I would never put 50 [to] 60 percent of my net worth in crypto. Unfortunately, a lot of younger people have bet that amount. When something moves from $4,000 to $20,000 in six months, the correction is going to be aggressive. What goes up fast comes down faster. That’s the nature of financial markets.

James Rubin
James Rubin has covered a range of business topics for such publications as the Economist Intelligence Unit, Forbes Insights and Adweek. His papers have been presented at World Economic Forum events. He was an associate editor at TheStreet and is the author of the "Urban Cyclist's Survival Guide."