New Hedge Fund Bets On Bitcoin

May 12 2014 | 10:57am ET

Coin Capital Management is this week launching a Bitcoin-focused hedge fund, which will buy and hold the leading crypto-currency in an institutional grade environment.

“We are pretty excited about Bitcoin…it is an exciting payment technology,” said Samuel Cahn, managing partner at the New York-based firm. “We are fully dedicated to holding Bitcoin, and we are the first ones to do so in an institutional grade hedge fund using the same types of checks and balances that investors have come to expect.”

Cahn founded Coin Capital—which is being seeded by a family office—along with his partners, brothers Sigmund and Drew Sommer.

Cahn, a practicing attorney, recently worked at the White Bay Group in a dual counsel and investment management role where he managed Combinations Capital Partners, a carveout dedicated to arbitrage and event-driven investing.

Sigmund Sommer has years of experience in mining, trading and investing in Bitcoin; he has also worked at Aladdin Gaming as an assistant to the chief technology officer and at Hello Networks as a senior server engineer.

Drew Sommer has also been at the forefront of the Bitcoin community, achieving success as a miner, trader and investor in the currency.

As for the fund’s buy and hold strategy, Cahn explains that it is based on simple, old-fashioned supply and demand. Since there are a finite number of Bitcoins, as demand rises, so will the price.

“We are really on the cusp of consumer adoption,” said Cahn, pointing to last year’s move by online retailer Overstock.com to accept the currency, and the more recent news that the Federal Election Commission has announced that Bitcoin is an acceptable form of currency for campaign contributions.

And as for security, an issue which has plagued the cyber currency in recent months with the collapse of Tokyo-based Bitcoin exchange Mt. Gox and the hacking of Canadian Bitcoin bank Flexcoin, Cahn said he is confident in his system’s secure storage capabilities.

“We arranged storage and custody to protect ourselves from [hackers]. We are using a multi-signature technology, which means no one party can sign off on a transaction alone,” he said, adding that the system also means that the investment managers are unable to run off with the funds, as a third party vendor is needed to confirm any transactions.

Coin Capital is using SS&C Technologies as its fund administrator and KPMG as its auditor. The fund is represented by law firm Thompson Hine.


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