BlockTower Capital to Lose $1 Million After Betting Bitcoin Would Hit $50,000

[cybersofts]

BlockTower Capital, a hedge fund which manages more than $130 million in client assets, made a $1 million bet last year that Bitcoin’s price would go above $50,000 by the end of 2018. The Hedge Fund is expected to lose over $1 million in options by the end of the week.


A Bitcoin Bet Gone Wrong
One of the largest crypto hedge funds in the world, which manages hundreds of millions of dollars in client assets, has made a shocking bet that it’s bound to lose by the end of the year.

BlockTower Capital’s co-founder and current chief information officer, Ari Paul, made a bet on behalf of the company on December 20, 2017, specifying that Bitcoin would be worth more than $50,000 by the end of 2018.

According to Business Insider, the bet would have enabled Paul, who spent just under $1 million on call options, to buy 275 bitcoins at $50,000 apiece any time before December 28, 2018. In total, if the options were exercised BlockTower could have spent up to $13.8 million.

However, with Bitcoin currently trading at around $3,800, it’s safe to say that BlockTower Capital won’t exercise those options.

At the time, the company stood by their decision saying it was a way to “risk a little to win a lot.” During an interview with CNBC on December 26, 2017, Paul said that “it was not a bet that something will happen, but a bet that something could happen,” and that he liked the odds and payout of the move.

Fast forward to December 2018, Paul told Business Insider that they “were not betting on or expecting” a Bitcoin rally. He claimed that the options were a way for the fund to maintain exposure to an extreme rally while reducing overall crypto exposure.

Perhaps Paul’s bet falls into the list of other lackluster 2018 predictions.


Reference: https://cryptoslate.com/blocktower-capital-lose-1-million-betting-bitcoin-would-hit-50000/

[Tytanowy Janusz]

1 mil loss is not that much according to the amount of money they loose not selling their bitcoins half year ago ... But who would know. I didnt sell mine too. I bought more. And ill buy more if it will go lower

[peter0425]

Well I'm pretty sure that he knows the risk when he put that bet and yes the money is not that much. It's a gamble he take the risk, he lost and that's its. But I'm sure that they are slowly accumulating at this bear market, lol so that they can recoup when bitcoin rally's again.

[Biodom]

If i remember correctly, the fund sold BTC and bought call options with a fraction of the proceeds.
If so, he maintained a potential upside, yet booked profits.
Not a bad play.

[Transformbitz]

No one knows when will bitcoin pump. Coz market is free for all anything can be manipulated. Bitcoin will literally surge more than 50,000 usd maybe end of 2019. Let' hope for the best. Just buy now while price is cheaper.

[tdrinker]

$1m loss for a fund that size is not very significant. If people are right and they sold only to hedge losses with this bet then it seems like they were ahead of most of the market and that the fund should have performed fairly well.

[Crypdon]

They could easily make that money back by simply buying now while the market is low. If i had enough funds like those guys do then i would be buying up everything at these crazy low prices. Especially bitcoin which can easily double in the next few months

[davis196]

1M USD loss for a 130 million USD hedge fund isn't such a big deal.
I guess that the crypto market analysts of that fund where pretty incompetent.
Everybody was expecting a 50K btc price around December 2017.The optimism was insane back then.
Only smart people would've recognise that this price pump was a bubble,not a stable long term trend.

[buwaytress]

Well, at least someone put some money where their mouth is. Some like McDickafee were happy to cash in on past predictions and then take millions more from Tweets. Not that there is any right way to do things in the predictions business... But nice to know people have got money riding on their otherwise worthless predictions.

But yeah. Time to double up on lost bets.

[el kaka22]

Honestly even if the price hit 50 thousand dollars it would have had to go way above that to make profit as well. They had rights to buy 275 bitcoins at 50 each which means if they sold at 60 each they would have made 3 million profit, 1 goes to this bet thats 2 million profit. I would have bought bitcoin directly instead of making a silly bet like this one.

I mean if you bought 275 bitcoins at even 20 thousand dollars you are tripling your money at 60 thousand dollars without the risk of totally losing everything you went into. Instead of crying over spilled milk they would have at least get some more bitcoin cheaper to drop the averages and hope it would go higher. Right now, they don't have that type of option and will just give over the money and lose everything instead.

[shield132]

As I see bet was made on December 20, 2017 when price was 17K and at that time it was moving between 14-20K, logically that bet wasn't made blindly because if you remember, price went from 10k to 16k in some days, that was insane so since it had so great start and people were so excited, why not to fully follow that and risk? Seems they failed, that happens.

[vit05]

If i remember correctly, the fund sold BTC and bought call options with a fraction of the proceeds.
If so, he maintained a potential upside, yet booked profits.
Not a bad play.

I searched and did not find any more information about it. But I found it quite interesting and safe. It's amazing how articles that involve finances try to be so hyped, trying to get the impression that everything is a casino. But when you read more, if you search more often are thoughtful and safe negotiations.

[South Park]

1 mil loss is not that much according to the amount of money they loose not selling their bitcoins half year ago ... But who would know. I didnt sell mine too. I bought more. And ill buy more if it will go lower

They may have lost some money but as long as they remain in the market they will eventually make money because the bear market cannot last forever, they only need to take a step back and lower their expectations from the market as all of us needed to do, however it is interesting that even such investors with such huge sums of money can make mistakes and that is reassuring to me since that means we are not alone when we get our predictions wrong.

[omonuyak]

That is very serious and this is one of the disadvantages of betting.  I think there could have been right if the bull market of 2017 was sustained.  2018 bring alot of lose to many traders including gambling and investors and I hope many of us will be able to recover our money this year 2019. Alot is expected to happen this year.

[hatshepsut93]

I know that hindsight is 20/20, but it seems like this hedge fund has seriously FOMO'ed at the peak of the bull run, and I didn't expect this kind of behavior from professional traders. The last bull run had a huge growth - from $200 to $20,000, and expecting it to go to 6 figures in short period was very unrealistic. I guess investors thought that everyone was adopting Bitcoin for long term, but in reality it was just a speculative bubble.