- Half of SkyBridge Capital’s $3.5 billion in assets are tied to cryptos like bitcoin and ethereum.
- The hedge fund has also made a big bet on algorand and added over $4 million of the ALGO token.
- Founder Anthony Scaramucci told us why he views algorand as a “top-tier” layer-one protocol.
After a career spanning hedge fund founder, White House adviser, and conference organizer, Anthony Scaramucci last week found himself in the 700-island nation of The Bahamas, co-hosting a four-day crypto conference with FTX founder Sam Bankman-Fried.
The inaugural Crypto Bahamas conference, which drew more than 2,000 attendees from around the world, took place at a time when Scaramucci’s SkyBridge Capital has pivoted heavily into crypto from its traditional hedge fund of funds business.
Thanks to organic growth and additional investments, about half of the firm’s $3.5 billion under management are now tied to digital assets like bitcoin and ethereum as well as crypto-related stocks, according to Scaramucci.
The firm’s exposure to crypto stocks is primarily through the First Trust SkyBridge Crypto Industry and Digital Economy ETF and the SkyBridge Digital Innovation Portfolio, which target brokers working in wirehouses such as Morgan Stanley and Merrill Lynch.
“They don’t necessarily have the compliance approval yet to buy bitcoin or to buy ethereum and hold it in an account at one of those respected firms, but they are comfortable with owning stocks that are publicly traded and geared towards the digital economy space,” Scaramucci told Insider in an interview at the Crypto Bahamas conference.
Betting big on algorand
SkyBridge launched its first crypto product — a standalone bitcoin fund — in January 2021. The firm has since expanded to offer an ethereum fund and a diversified coin fund that invests in major altcoins including solana (SOL) and avalanche (AVAX).
However, its biggest layer-one protocol bet is placed on algorand (ALGO), a pure
proof-of-stake
blockchain and the brainchild of the Turing Award-winning MIT professor Silvio Micali.
In September, SkyBridge raised $250 million for an algorand fund. The firm also has “$4 million or $5 million” of the ALGO token on its balance sheet, Scaramucci told Insider.
“We may be wrong about this,” he said. “I think we’re so early that none of us are wise enough to predict which layer-ones are going to ultimately be the operating standards, if you will, over the next 10 to 15 years.”
The firm’s high-stakes wager on algorand is backed by several technical properties that he likes and can stand behind over the long term. Like many algorand supporters, Scaramucci believes that the smart contract platform is one of the few that have truly solved the blockchain trilemma of decentralization, security, and scalability.
“Professor Micali has created a scalable, secure, energy-efficient layer-one technology,” he said. “It has never gone down since it’s gone up. It has a negative net carbon characteristic to it.”
In contrast, fellow smart contract platform solana has been plagued by outages since its launch while traders have complained about their transactions getting dropped as a result of network congestion.
“Even though solana has gone down a few times, I think solana has got a lot of excellent technical properties that are going to make it, in my opinion, one of the long-term survivors for layer-one,” Scaramucci said.
A ‘top-tier’ smart contract platform
Despite algorand’s promised technological prowess, its token performance has paled in comparison to fellow layer-one protocols like solana, which was up about 77% in the past year despite major drawdowns in the crypto market.
The ALGO token, which was trading at less than 60 cents as of Monday morning, has plunged 57% over the last year, according to CoinGecko data. As a result, SkyBridge’s algorand fund has also shrunk to about $120 million from more than $200 million as the ALO token fell to around 70 cents (as of April 26) from $1.50 when the fund first invested.
The short-term weak price action could be the result of “too much supply in the marketplace” and the current lack of a robust enough community, in Scaramucci’s view.
“I think those are correctable things long-term because the technology is so good,” he said. “So it’s almost like a value proposition in layer-ones. It is cheap relative to its long-term potential.”
The firm is also staking algorand by locking up the ALGO tokens to help validate transactions in exchange for rewards, which could range from 2.57% to 7.17%, according to Staking Rewards.
Over the long term, he expects to be right about at least “a few” of the 15 layer-one protocols that the firm’s diversified coin fund is betting on and generate venture capital-like rewards for clients.
“This is a real long-term macro idea for SkyBridge,” he said. “This is a massively powerful economic de-layering mechanism where you are going to take out third parties and you are going to make the cost of transactions less expensive, and you are going to make the economy more efficient.”
