While banks and financial trading firms become more involved with bitcoin, a crop of youthful financial professionals is forsaking traditional careers and becoming cryptocurrency entrepreneurs, according to Reuters. Bitcoin is no longer strictly the province of small-time investors seeking an alternative to government-backed currencies.
Jason Lukasiewicz, 29, left a six-figure salary in private equity at The CapStreet Group in New York to move to the bitcoin world in late 2012. He is founder and CEO at Coinsetter, a New York-based bitcoin exchange.
Bitcoin Funding: Hard To Ignore
“A lot of people are entering the bitcoin space as the sector has reached an overall level of funding that’s hard to ignore,” said Lukasiewicz.
Timo Schlaefer, 34, had a doctorate in financial engineering and was working at Goldman Sachs in London. After working with the bank’s mergers and acquisitions team, he became an executive director of credit quantitative modeling.
In February, he left his promising position to launch Crypto Facilities Ltd., a bitcoin derivatives trading platform. The platform trades bitcoin forwards, which are directly linked to the price of bitcoin. It is also developing other digital currency derivative products. The company now has six employees.
“This is uncharted territory,” said Schlaefer. “It’s an exciting opportunity to participate in a new area of technology that has massive potential.”
Schlaefer won’t make anywhere near the kind of money that he would potentially earn at Goldman in the near term. But for him, it’s less about the compensation and more about being part of the growth in bitcoin and its underlying block chain technology.
Many Wall Street firms, meanwhile, continue to invest resources in cryptocurrency. Online bitcoin job ads in June surged to a record high of 306, according to Wanted Analytics. Banks such as Capital One and tech companies such as Intel and Amazon have placed ads. In previous months, Citigroup and TD Canada Trust also ran bitcoin job ads.
Paul Chou, 31, worked at Goldman Sachs in New York as a quant equity trader after graduating from the Massachusetts Institute of Technology with degrees in computer science and mathematics. He left that position to pursue a bitcoin career. Chou is the founder and CEO of Ledger X, an institutional trading and clearing platform for bitcoin options. He is awaiting regulatory approval from the Commodity Futures Trading Commission to trade and clear options on bitcoin.
“I took a very large salary pay cut to do this, in return for equity in a start-up that can be worth a lot someday,” he said. He said his hours are much longer as an entrepreneur. He is constantly refining ideas for strategy and thinking about which areas to focus on.
“The domain expertise, relationships, and career equity I’ve built are things I never could have done while at Goldman,” Chou said. “As a former trader, I’m glad I made this trade-off at the stage of my career that I did.”
These entrepreneurs face risks, as not all endeavors have proven successful.
Buttercoin, a U.S. bitcoin marketplace, ceased operations in April after raising $1.3 million in funding. MyCoin, a bitcoin exchanged, closed in February of 2015, leaving about 3,000 investors out of pocket.
Mt. Gox, a once-dominant bitcoin exchanges, closed up shop without warning in February last year, filing for bankruptcy and leaving investors approximately $500 million in the red.
Investment In Bitcoin Grows
In the first half of 2015, investment in bitcoin companies totaled $375.4 million, exceeding 2014’s $339.4 million, according to data from CB Insights. Venture capital funding of bitcoin start-ups increased about 280 percent in 2014 from 2013.
Bitcoin start-ups have increased by more than 80 percent from last year. By July’s end, there were 814 digital currency start-ups, compared to 444 the prior year, according to Angel List, which tracks start-ups seeking to raise money from angel investors.
Some traders see better risk opportunities as banks defer compensation and add provisions that give them the right to limit bonuses, said San Francisco-based Rick Henri Chan, COO at Airbitz, a digital wallet platform. Chan, 47, worked for Deutsche Bank as head of its over-the-counter derivatives technology in Japan, and was a trader at UBS and Morgan Stanley before entering the bitcoin realm three years ago.
He had a multi-million dollar package at Deutsche and he now works longer hours.
“But we’re doing something special here at Airbitz. And I do think our company will be valued at a lot more in the future,” he said.