Bloomberg interview with Su Zhu, founder of Three Arrows Capital: Bitcoin’s potential to become a reserve currency is clearer than ever

When Su Zhu co-founded Three Arrows with Kyle Davies a decade ago, it seemed like a risky bet for two derivatives traders in their 20s. But the bet paid off. Today the firm’s investments include Bitcoin, Ethereum, AVAX, and SOL, as well as DeFi projects like Neon, funds like Multicoin Capital, and P2E project Axie Infinity, according to its website. Analyst firm Nansen estimates the institution’s blockchain assets alone are worth nearly $10 billion. (Zhu said only that the company’s assets were in the “billion dollar” range and would not provide data on the fund’s returns.)

Zhu, who turned 35 in April, was born in China, moved to the United States at the age of 6, and has been a Singaporean citizen since 2016. He proudly tweeted on December 21, 2018, calling the year’s “crypto winter” the bottom: “We’re going to break out of the bottom very quickly, leaving most outside investors trapped in fiat currency.”. Bitcoin, which was worth about $3,850 at the time of his tweet, surged to about $47,000 in late March.

Zhu talked about his career and investment philosophy in an interview with Bloomberg in late February. The following is a transcript of the conversation, with the interview condensed and edited for clarity.

Joanna Ossinger: How did you get into the financial industry?

Su Zhu: I did a very typical pre-GFC (Global Financial Crisis) line. Majored in math at Columbia University, did a summer internship at an investment bank, and later became a full-time analyst. I started trading equity exotic derivatives at Credit Suisse in Tokyo in 2008 and was fired during the financial crisis. Then I was lucky enough to find a junior trader role at Flow Traders, a Dutch ETF market maker expanding in Singapore. Spent a few years there, then worked for a year at an investment bank in Hong Kong, and finally co-founded Three Arrows Capital with my high school and college classmate Kyle Davies, which deals in emerging markets foreign exchange. Considering we were 25 years old, starting your own fund at that age is very rare.

JO: What drew you to the cryptocurrency industry?

SZ: I got into Bitcoin in early 2013. The main activity is concentrated on exchanges in China where you can do all kinds of arbitrage trades. At the end of 2017 it was very clear to me that cryptocurrencies would follow a dot-com cycle of creative destruction and then eventually become Across finance, technology, culture and politics.

JO: What are your main areas of focus at Three Arrows?

SZ: Derivatives trading has always been what we do for a living and will always be a big part of what we do, and it’s also tied to our venture capital. Crypto trading firms have performed well since 2018 because they have the resources to invest in good people regardless of market conditions. We don’t have any outside investors, which allows us to make really good decisions about market timing, which we then use for continued reinvestment in the entire ecosystem. Making sure we get revenue from market volatility and continue to invest in the team is my number one priority.

JO: Which areas have the most potential?

SZ: I believe in Amara’s Law, that technology is overvalued in the short term and undervalued in the long run, especially when applied to cryptocurrencies. Today, the most promising area may not even be considered a cryptographic use case. That said, I’m excited to see what scalable L1s like Avalanche can bring to users and application developers. We don’t even know what kind of network effects and emergent behaviors might emerge when the number of users starts going into the millions, tens of millions, and hundreds of millions. Most of the applications that people use today and consider to be in the web2 domain will eventually be disrupted by lightweight and community-owned web3 technologies.

I also think we are entering an era where Bitcoin’s potential to become one of the main reserve currencies for people and nations is clearer than ever. It won’t be an easy journey, but it will be a very rewarding one for those who do.

JO: What’s the worst thing about cryptocurrencies?

SZ: Tribalism and fierce competition among crypto communities. The Austrian economist Mises predicted an open competition for private funding and technology, and I think we are now seeing this play out in a high-stakes way. Still, when people have a high percentage of their net worth among these assets, tensions inevitably increase, and in a way it also shows the resilience of the community and what people are really willing to fight for.

JO: What did the Ukraine war reveal about cryptocurrencies?

SZ: The power of encryption to protect individual rights. Ukrainians use it to protect their wealth from war, while Russians use it to flee the country and retain some level of assets. Furthermore, encryption enables the global community to closely interact with what is going on.

JO: You often mention history and philosophy. How do these themes affect your work?

SZ: To really get a cryptocurrency, you have to understand what it’s reacting to and where it’s going. To me, encryption represents several trends:

away from centralized control, towards decentralized decision-making; away from closed-source walled gardens, towards open source discussions; from institutional ownership to individual ownership; away from permissioned assets, towards autonomous bearer assets; away from crony capitalism, towards collective capitalism; from The platform obtains value from creators and fans, and turns to creators and fans to share value.

I am a libertarian, but at the same time I am also a volunteer. That means I don’t want to convert everyone to my own way of thinking – I just want to help build a world where there are parallel liberty-centric systems and at some point in the future, anyone can participate this system as they see fit.

The first major victory for individuals was the advent of the Internet, and the second was the development of open-source peer-to-peer encryption in the 1990s. At the time, the existence of end-to-end encryption for individuals was so alarming that the U.S. government tried to dismiss its spread as an illegal export of military-grade technology.

Since then, we have learned that these are in fact inalienable human rights that we have always had. Technology has brought back behavior as natural as giving someone cash or having a simple conversation in the real world. I refer to the concept of encryption as a “recovery lost movement” technique because it is a key step in reclaiming the key foundations that individuals have given up over time.

JO: What investments are you most proud of and least proud of?

SZ: Invest in Deribit, the leading crypto options trading exchange, during a bear market. Invest in layer 1 blockchains like Avalanche, Solana, Polkadot during bear markets, especially through the OTC market. All of this felt very contrarian at the time, but in a sense, going against the rules and supporting hard-working, tech-oriented teams paid off.

I don’t think there’s anything I’m not proud of. Even with projects that lose money, what matters is that the projects were tried and the founders tried. People often see things that fail and try to draw broader conclusions without recognizing the probability and unknowability of everything. For example, our best VC to date was Axie Infinity, which didn’t even reach the expected subscription amount in the seed round, so much so that people thought they were doing charity.

Probably the most crowded investment theme I’ve seen is Facebook’s Libra node, where everyone has an SPV (special purpose vehicle) set up for it and thinks that’s going to be the future of cryptocurrencies. (Facebook planned to revolutionize global finance with a crypto initiative called Libra, later renamed Diem, but it never got off the ground. All assets were sold to Silvergate Capital Corp. earlier this year.)

JO: Who do you most admire in history or philosophy?

SZ: If you look at people like Lee Kuan Yew (the late founding Prime Minister of Singapore), what he achieved through the separation of Singapore from Malaysia is incredibly futuristic. Essentially, Singapore is the first startup city. It must go through the multiple challenges of nation-building in a dangerous geopolitical environment: security, energy, economy and culture. I see a lot of analogies to crypto community building itself. You have to believe in the power of community and the collective will to act, and the importance of uninterrupted transparency and honesty and the ability to win on the battlefield of ideas.

JO: What is your future? What about the three arrows?

SZ: I want to do what I can to support the development of whole-system thinking. I see important parallels in how we as a society view futurism itself – many technologies that sound futuristic are actually backwards, and many that seem clunky are actually powerful human-augmented innovations.

I strongly support nature-based grassroots solutions to key agricultural problems and look forward to making a bigger impact there. My commitment to this is an extension of the same spirit and philosophy that underpins my commitment to cryptocurrency. Nature-based food systems or agroecology diversify our access to nutritious food and clean water. They free us from our dependence on global supply chains.

If we build agricultural alternatives at the community level, then people can choose to participate in this more localized parallel food system. Community-supported market gardens, especially in cities, expand our freedoms. They will be another major victory for the individual as they will give us greater control over our health and nutrition while regenerating the planet.

As for Three Arrows, we will continue to do what we do best, which is to invest in crypto assets and support crypto builders and communities over the long term.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/%e5%bd%ad%e5%8d%9a%e7%a4%be%e4%b8%93%e8%ae%bf%e4%b8%89%e7%ae%ad%e8%b5%84%e6%9c%ac%e5%88%9b%e5%a7%8b%e4%ba%basu-zhu%ef%bc%9a%e6%af%94%e7%89%b9%e5%b8%81%e6%88%90%e4%b8%ba%e5%82%a8%e5%a4%87%e8%b4%a7/
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