Steve Cohen quietly sets up crypto-only Asset Manager

Billionaire hedge fund Steve Cohen is founding an investment firm focused exclusively on cryptocurrency, according to four sources familiar with the matter.

Although the new entity is in its early stages, sources said the business plans to trade spot cryptocurrencies — a segment Cohen’s multi-strategy hedge fund firm, Point72 Asset Management, has yet to touch. It will also trade digital asset derivatives, as well as look to write checks to external digital asset-focused hedge fund managers, including possible seed deals.

The name of the startup – which is set up separately from Point72, Point72 Ventures and Cohen’s family office – is not known. But Cohen himself has played a key role in its formation, which will require significant expenses when it comes to staffing, not including expensive trading infrastructure and operational needs.

It’s the latest indication that Cohen, who has taken stakes in crypto startups he considers promising, is becoming increasingly bullish on digital assets. A growing number of deep-pocketed traditional financiers are considering deploying large capital into the space, mindful of rock-bottom prices as markets continue to rumble following the collapse of Terra stablecoin UST and the demise of crypto lenders including Celsius and Voyager.

A spokesman for Cohen and his asset management firms declined to comment. Sources were granted anonymity to discuss sensitive business matters.

In addition to trading more vanilla spot cryptoassets, the new firm is likely to venture into decentralized finance projects, including yield farming, a source said. The upcoming line of business will also look to engage in staking, an area being drawn into the spotlight leading up to Ethereum’s pending transition from proof-of-work to proof-of-stake.

While the startup is believed to have no immediate plans to accept outside capital, the effort is a mechanism for Cohen to begin laying the groundwork for a future broad-based crypto trading platform. Even during the bear market, competition for top-level talent has intensified as Point72 multi-strategy hedge fund rivals, such as Millennium Management, have increasingly devoted resources to the sector.

Even Citadel’s Ken Griffin, long a skeptic who last fall called cryptocurrency a “jihadist conversation” against the US dollar, has reversed course and acknowledged that digital assets are here to stay.

That said, the space is ripe with regulatory concerns, as well as conservative sovereign wealth fund limited partners who have urged caution with crypto. Both points are why multi-billion dollar hedge fund firms, for the most part, refrain from trading spot crypto products through their flagships, sources said.

“They are still working through the details, but the plan was not to put all the bread into the flagship fund,” a source said. “They clearly have a lot to learn about the space. [Probably] aren’t ready to call just yet.”

The regulatory uncertainty between the SEC and the Commodity Futures Trading Commission (CFTC) over whether the likes of bitcoin and ether are securities or securities has added to the tension.

“The regulatory stuff is also something they’re worried about,” one source said. “They are concerned about how they actually touch this asset class.”

Supporting external dealers would be another way to gather intelligence on viable – and, crucially for the asset manager, scalable – strategies, without the complications that would come with direct investment in digital assets in-house.

It’s quite a natural extension of Cohen’s angel investments in blockchain companies. Not all have panned out, including ditching his stake in proprietary digital asset trader Radkl, but Cohen has still preferred access to dealflow, by traditional finance standards.

“[It’s probably] what all these other guys are doing,” one source said. “The companies aren’t in crypto, so they’re telling investors, but the founders are.”

Point72 has $26.1 billion under management. The firm is looking to hire a number of candidates for its own in-house developing in-house crypto operations.

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