- Michael Wang is the founder and CEO of alternative investments platform Prometheus.
- The exec broke down how bitcoin failed to live up to its billing as an inflation hedge.
- Wang also laid out why bitcoin and ether remain top crypto options for retail investors.
“The world is moving towards more transparency,” says Michael Wang, a former senior analyst at Steven Cohen’s now-defunct hedge fund SAC Capital.
The 15-year capital markets vet, who later worked for a now-shuttered hedge fund Tourbillon Capital Partners, told Insider that Wall Street has a transparency problem. But Wang says his Los Angeles-based fintech startup is making strides to fix this.
His new venture, Prometheus, is an alternative funds marketplace coupled with a social network. It facilitates investment in hedge funds, venture-capital funds, and crypto funds — despite the latter not being especially known for its transparency.
Wang says to imagine the platform as a pseudo-LinkedIn for people who want exposure to more than what Robinhood and Coinbase has to offer them. The transparency problem across the assorted funds listed above, Wang mentioned, can be remedied with a more efficient and faster avenue to communicate with investors.
“Think about how many doctors, lawyers, entrepreneurs, and engineers you know that have probably close to 0% of their assets in hedge funds, venture funds, and private equity funds,” Wang said. “We want to change that.”
Bitcoin’s questionable reptuation as a safe-haven asset
Given how Prometheus allows users to invest in crypto funds, Wang has been watching the space as its seen widespread losses over the past several months. For context, both bitcoin and ether — the two most dominant cryptos historically — have lost more than 50% since recent highs in late 2021.
There’s also been wreckage in altcoins, perhaps none more severe than in USDTerra and its sister coin LUNA. Solana is down 83% from its record high amid sporadic outages on its network.
The fact that this has all happened at a time when the US is seeing the highest inflation in 40 years has dispelled the formerly popular idea that bitcoin could serve as a hedge against higher consumer prices. Instead, bitcoin, and crypto at large, has functioned more like a traditional risk asset.
That explains why crypto prices have declined alongside stocks for the better part of 2022, in response to the Federal Reserve’s monetary tightening efforts, which are intended to cool inflation and head off an overheating economy. With the central bank set to announce significant rate hikes at their next two meetings, the main headwind for both crypto and equity investors looks likely to persist.
Wang, who was named Institutional Investor’s 2016 Hedge Fund Rising Star, said crypto markets are highly correlated with the broader equity market, and agreed with the narrative that bitcoin has failed as an inflation hedge. But that interrelatedness is just the start: Wang notes that bitcoin has a “much higher beta” than stocks, making it more susceptible to sharp downside swings.
For signs of what’s to come in the crypto market, Wang — like most stock investors — is looking at central bank activity.
“What supersedes anything for any asset class and asset price whether it’s crypto, stocks, or real estate is what the Fed does,” Wang said.
What to buy amid crypto wreckage
Wang predicts that most cryptocurrencies are not going to “survive” long term with the exception of “probably” bitcoin and ethereum. The two have amassed large market caps and have garnered enough mainstream adoption to withstand bearish markets.
“Your litmus test here for some stocks and cryptos is that if it’s not going bankrupt, you’re probably going to make money holding it for a year,” Wang said.
Bitcoin, in particular, will continue to gain traction as a borderless payment method, allowing users to bypass remittance fees and slow transaction times.
“Many parts of the world are still unbankable,” he said. “Blockchain can be used as a solution in helping people in those areas.”
