2020 has been a huge year for crypto. Since early in the year, global uncertainty has sent shudders down the spine of the financial world. The turmoil, as well as the massive stimulus packages that emerged as a result, may have permanently changed the course of the world’s economic history.
One of the consequences of the economic events of this year has been an influx of investors into so-called ‘alternative assets’ as investors increasingly search for new places to find yield. For many investors, this search for yield has landed them squarely in cryptocurrency markets.
The Most Diverse Audience to Date at FMLS 2020 – Where Finance Meets Innovation
Recently, Finance Magnates spoke to Scott Freeman, Co-Founder of JST Capital, about this influx of new money into crypto. JST Capital is a financial services firm specializing in the digital asset market, serving companies, foundations, and high-net-worth individuals.
Scott, who has a background in the traditional financial world, also spoke about the effects of government stimulus efforts on the economy, about current trends in the crypto markets, and about the work that JST Capital is engaged with.
Finance Magnates · FMTV: Scott Freeman, co-founder of JST Capital
Prior to co-founding JST, Scott was the co-founder and Managing Partner of Tachyon Capital Management, a quantitative hedge fund. He was also the Managing Director at Bank of America, where he oversaw the company’s electronic Foreign Exchange trading business.
Scott has also worked as an attorney with the Federal Reserve Bank of New York and served for several years as a prosecutor with the Manhattan District Attorney’s Office.
This is an excerpt. To hear Finance Magnates’ full interview with Scott Freeman, visit us on Soundcloud or Youtube.
Leveraging Crypto Options for Long-Term Gains
We asked Scott about how changes in market trends have influenced crypto options, which are an important part of JST Capital’s operations. “We trade for our own book, and more importantly, we work with clients to help them use options to either generate returns or to manage their balance sheet better,” Scott said.
“[…] There are a lot of people in this ecosystem who are sitting on a large amount of crypto,” he said. “People who have been sitting on it for years and have a lot of their net wealth tied up in it, and are looking for ways to increase the return on that asset.”
At the same time, they “want to stay long on the asset,” Scott explained. “People like that are often interested in options structures where they generate premium. Maybe they give up some upside or give up some downside, but depending on their risk tolerance and their profile, we work with clients to help them generate additional returns on their assets.”
Scott explained that this group of crypto holders who have been sitting on large sums of crypto are some of JST’s ideal clients, individuals or entities that “are sitting on a large balance sheet of assets and do not necessarily want to sell those assets.” This can also include token issuers, as well as foundations within the cryptocurrency space.
My colleague & JST Digital Founding Partner Scott Freeman gave his views on the role and expectations that #crypto & #digital asset firms should have as they contemplate generating all important token #liquidty speaking at @StellarOrg Conference. https://t.co/J1cWUUakf3 #meridian https://t.co/RWNTeobHo4 pic.twitter.com/06v7IxZr4K
— Louis Curran (@CurrencyWar1) November 7, 2019
“You Can’t Find Yield Anywhere These Days.”
Still, despite the volatility fluctuations in cryptocurrency markets, there has been an increased number of investors heading for the cryptocurrency space, particularly since the Federal Reserve began quantitative easing as part of its COVID-related stimulus efforts earlier this year.
Scott explained that this is because investors are hungry for returns, which are few and far between: “we’ve seen an increase in investors that are looking for yield. You can’t find yield anywhere these days.”
“The world is awash in cash right now,” he said. “People just need places to put it, and to buy a ten-year note and earn 70 basis points on it, or to buy stock in Apple that’s gone up four-fold this year. Those just aren’t great places to put it these days.”
“So, interestingly, we have seen an increase in the number of inquires we’ve had from clients about investing in the crypto ecosystem. People want to know what kind of returns they can get. And the returns that they can generate are pretty good, relative to what’s happening in the market.”
“In the past, where people didn’t want to deal with some of the anomalies of the crypto ecosystem (the way that custody works, the way that trading works, the way that exchanges work; the lack of consistent regulations). I think that people are more comfortable with those risks now,” he said.
“They’re comfortable investing assets in this ecosystem because returns elsewhere are so anaemic right now.”
Winds in the Sails of Crypto
Scott said that he sees the trend toward crypto continuing: “we think there’s a lot of ‘tail winds’ for us that are supporting it.
“For one thing, the regulatory environment is getting a lot more favorable: there’s a lot more transparency, there are a lot more regulators that are giving clear guidance on where their lines are of what you can and can’t do.”
Additionally, “clients are valuing customers and institutions that have a clear regulatory framework. So if you are regulated, we think of that as a competitive advantage,” he said, “and clients think that’s a competitive advantage.”
There is also massive expansion happening in cryptocurrency at the moment: “we also think that the growth of the Defi space has been huge in the last six months,” he said. “We think that’s going to be a huge evolution.”
This is an excerpt. To hear Finance Magnates’ full interview, visit us on Soundcloud or Youtube.
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