- Mognetti’s initial attraction to bitcoin was the price
- The nature of blockchain, the fixed supply and the immutability, all drew Mognetti in
CoinShares co-founder and CEO Jean-Marie Mognetti has an advantage over many crypto investors today: he was early.
“I’m not going to say that we were able to connect the dots before the dots even existed,” Mognetti said, “but we could see a sort of path forward.”
Mognetti, an economist by training, has been with CoinShares since before it even became CoinShares.
“Before CoinShares existed, there was a company called Global Advisors, which was focused on commodities,” said Mognetti. “It was founded by my two current business partners, Russell Newton and Danny Masters. I joined them in this commodity lifecycle at the very end.”
Masters and Newton, both oil industry and JPMorgan veterans, brought Mognetti on in 2012. The commodity investment firm ran from 1998 until early 2013. Global macro investors had largely begun moving out of commodities and into equities and fixed income at the time. Global Advisors needed a new investment area.
“We believe a lot in global cycles and supercycles, and commodities were out,” Mognetti said. “It was time to find a new cycle.”
Looking for a new cycle
It was in looking for this ‘new cycle’ that they came across digital assets.
“Our core was deep value thematic investments, and we stuck to that,” Mognetti said. “In the process, we discovered bitcoin.”
The initial attraction to bitcoin, Mognetti said, was the price, which was around $700 toward the end of 2013. They foresaw lucrative returns, and they were correct.
“We discovered the crypto cycle in late 2012, early 2013 and started to refocus our business on that by 2014,” Mognetti said. “We went into crypto with our eyes wide open on bitcoin’s price more so than the technology.”
Mognetti started trading digital assets and began to understand the ecosystem more. Crypto was nothing like other asset classes, he noted.
“What we really discovered, going into crypto, was the trading aspect,” he said. “Especially in the early days, crypto was a very illiquid, patchy market. It was very volatile. There were multiple jurisdictions and it was trading 24/7, 365 days a year, which is not what happened in commodities.”
As they continued with their digital asset research, Mognetti said, the technology started to intrigue them more.
“We discovered the technology a little bit after we got into trading. We said, ‘well, what is really behind this?’” Mognetti said. “We started doing all the mathematical computation to understand everything about mining and how the technology works.”
It was then that Mognetti started to see the possibilities of crypto and how it could change global financial landscapes.
“I grew up in France and I have a lot of friends who come from countries where the economies have been decimated,” Mognetti said. “I saw some very distressed situations, and I have always been bothered by that, ever since I was a kid. It’s something that has always stayed in the back of my mind.”
The nature of blockchain, the fixed supply and the immutability, all drew Mognetti in.
“I realized that there is something to believe in here. There’s something to explore and to keep pushing toward,” he said. “Now, seven years later, we feel very blessed to have kept pushing in that direction. We were armed with the truth early on and had the courage to follow our convictions.”
The digital asset shift
By 2014, Global Advisors had completely shifted into the digital asset space. The CoinShares name followed in 2016, although the path into crypto was not easy, especially from a regulatory standpoint.
“Between the SEC, the IRS and the CFTC, there’s not a single person or single regulatory or even quasi-regulatory environment in the US that will agree on the treatment of digital assets,” Mognetti said. “We knew the final products had the potential to be fantastic, but the in-between was quite chaotic.”
CoinShares went on to create the first regulated bitcoin hedge fund, exchange-traded bitcoin product and exchange-traded Ethereum product, among other services.
“You need to bet against the consensus,” Mognetti said, loosely quoting investor Ray Dalio. “And that’s what we did.”
There were certainly skeptics that thought CoinShares was too early for its time, and there are still some today that point to the current selloff in the crypto market with doubt. Mognetti, however is not concerned. They may have entered the space with the price in mind, but the technology is what made them stay.
“The price is a very bad indication of the technology,” said Mognetti. “When the price has been down in the past, the technology that has been built has been incredible. People don’t stop building because the price goes up or the price goes down.”