Union Square Ventures & Andreessen Horowitz Inject $10 Million Into Polychain Capital, a Cryptocurrency Hedge Fund

Polychain Capital, a digital currency & blockchain-based digital asset hedge fund led by former head of risk officer at Coinbase, Olaf Carlson-Wee, has raised $10 million from Union Square Ventures and prominent bitcoin investor Andreessen Horowitz.

The San Francisco-based Polychain Capital will be looking to buy into various blockchain tokens with specific use cases and applications in the real world, “Disproportionate returns will go to holders of the tokens rather than investors in private companies built on top of the protocols,” states the Polychain Capital’s Angel page.

Carlson-Wee told Forbes there are many potential investment opportunities beyond bitcoin-focused startups, “There will be many types of assets codified into the blockchain, and they are all not just going to be on the bitcoin blockchain — it’s going to be a number of different assets here. And the best way to invest in that is a diversified portfolio,” he explains.

The 26-year-old entrepreneur believes these blockchain-based, P2P-style networks will eventually replace most of the centralized social media, finance & cloud storage companies on the internet today.

And one of the ways for institutional investors to profit from this trend is to gain exposure to the tokens of these networks. Today, all digital currencies, including bitcoin, are worth approximately $14.3 billion, according to data gathered by Coinmarketcap.com!

While this figure may not seem overly impressive when compared to some other industries, Carlson-Wee tells Forbes’ Laura Shin that a sizable portion of online economic activity may take place on these decentralized services in the near future, which may propel the value of some of these networks and their tokens into the hundreds of billions.

Carlson-Wee’s predictions may come to pass, but majority of alternative digital currencies have struggled over the past few years to maintain their valuations. Even ether - the token of the much-hyped Ethereum smart contract network and the second most valuable digital asset after bitcoin - has dropped close to 60% since May of this year.

An analysis done by cryptocurrency analytics site WooBull.com of 118 digital currencies that achieved a market capitalization of at least $250,000, shows how poorly the vast majority of these digital assets have performed when compared to bitcoin:

However, there are a few exceptions like gaming-focused digital currency Gamecredits, privacy-focused Monero and Storjcoin, the token of the P2P Storj cloud storage network, which have not lost value over the past 2-3 years.

At press time, the Polychain Capital page only displays a short disclaimer and the email address of Olaf Carlson-Wee.