A Teenager Enlisted for US’ Iraq Invasion: Now He’s a Crypto CIO
Strix Leviathan’s trading head learned a lot about risk as a soldier. Here’s what Nico Cordeiro has carried over into crypto.
Nico Cordeiro/Modified by Blockworks
Nico Cordeiro works for a crypto hedge fund firm now.
More specifically, he heads up Strix Leviathan’s trading strategies as the firm’s chief investment officer. Before that, he co-founded Makara, an SEC-registered so-called robo-advisor that went on to be acquired by Betterment. And prior to that, he worked for PitchBook.
But before the switch to civilian life, Cordeiro spent more than half a decade in the US Army.
The Strix Leviathan trading head served in Iraq and Afghanistan from 2008 to 2015, a stretch that Cordeiro said felt both long and short at the same time. He was stationed in some of the region’s most difficult and dangerous US outposts, including Afghanistan’s Arghandab River Valley and Baqubah, Iraq.
Over those seven or so years, the infantry platoon sergeant came under heavy enemy fire on many occasions. His fellow soldiers died around him. And he narrowly escaped an incoming RPG that landed “like two feet above my head.”
He still feels “extremely lucky,” considering that on the latter occasion he “took enough shrapnel” to where he was “pretty damn bloody,” but not literally “cut in half.”
Along the way, Cordeiro discovered Bitcoin, hearing about this “new digital currency that nobody owns” that’s “kind of decentralized.” There was a moment in Iraq — about eight years into the US invasion and ensuing occupation — where the potential of Bitcoin “kind of clicked in my head standing there in Iraq, where we had just watched an entire nation’s infrastructure destroyed.”
“It got me thinking,” Cordeiro told Blockworks in a recent interview. “If you’re a businessman, or you own assets — or even if you just have a large bank account of Iraqi currency when that was kicked off, your options for maintaining that wealth [are few and far between].
You buy physical gold quickly, and you chuck it out across the desert or across borders, which has its own inherent risks to it. Or you leave, flee the country and start completely over from scratch in a new country. Or the third option, you just stay and fight or deal with all the mayhem that’s going on. The use case just clicked, being able to cross the border with however much money in your head, essentially. That was pretty powerful.”
Cordeiro was 19 or so at the time and stumbled upon a news article about bitcoin (BTC) that filtered through Iraq’s rocky communications infrastructure. This was when cell phones were still a novelty, when dial-up internet was still a thing, when precious few had even heard the word “Bitcoin.”
And when even fewer knew anything about what it actually meant. Let alone what it could become. Here’s how Cordeiro fell down the Bitcoin, then crypto, rabbithole, and how he wound up at a digital-assets focused hedge fund firm.
It’s not a likely story.
Blockworks: You were a teenager in Iraq when you heard about something called “Bitcoin.” What went through your mind?
Cordeiro: I was really young back then. When I got back from Iraq, I didn’t really pay any attention to it. Anything to do with crypto didn’t really pop back into my thought process until the end of the 2013 bull market.
There’s a ton of news stories that can came out around then, terrible news stories — like people committing suicide because they lost massive amounts of wealth that they had built up, and there was just so much that I got a little bit more into it then.
I didn’t do too much with it, though, other than following the news cycle and trying to dig in a little bit deeper… And then, in 2016, I dove back in. I got introduced to the theory behind crypto and this broader ecosystem that was being built and started putting personal capital to work in 2016.
Blockworks: What did you learn about yourself and your ability to manage stress while serving?
Cordeiro: I learned that I do well in fast-paced, high stress-situations.
I don’t know how to say this without sounding the way it sounds, but it didn’t really scar me.
There are bits of it that were absolutely miserable and terrible. I lost friends and soldiers that I was responsible for, which is a lifelong thing that you have to deal with.
But there was a lot of cool shit, if I may say that. I know, it sounds terrible to say to a civilian.
But it’s hard to explain; I don’t know. I just felt like I thrived in that environment. And that was actually kind of how I ended up in hedge funds, private equity and traditional finance.
Blockworks: What was your thought process behind where you wound up?
Cordeiro: So, I had been wounded when I was in Afghanistan, and my wife was pregnant, and I started my process of getting out.
At the time, I was like, ‘Oh, I’m gonna be a lifer. I’ll go to SFAS [Special Forces Assessment and Selection] and do special forces training with our students for 20 years.’
When I was wounded, someone called her. I still have no idea who. They said ‘Your husband’s been wounded in combat; we don’t know anything else.’
She didn’t hear from me for another week or two, because we were under a blackout … When someone was killed, they do a blackout [on military communications home]. They don’t want news getting back to the family before the military notifies the family officially.
Unfortunately for Afghanistan, we were pretty much always in blackout — and had pretty on-and-off internet exposure.
My wife just spent that whole week visualizing [what could have happened]. Obviously it wasn’t bad (Cordeiro was back in action a couple of days after sustaining a shrapnel head wound.)
But that really [amped up] my thought process of how to get out.
Dude, I basically said, ‘All right, I’m tired of making peanuts and risking my life. So, where can you make a lot of money, but also need to be good under stress and make fast paced decisions?’
That basically led me to the hedge fund world. So, I started down that path.
Blockworks: And that path eventually led you to crypto?
Cordeiro: I wound up spending another three years in the military after Afghanistan … After I got out, I finished my bachelor’s in about six to nine months, and then I rolled into my master’s of science in finance.
At that time, I interned at a private equity firm. So that was my first intro into an actual finance job. The guy who ran it was an old Navy guy, so that helped.
And then I went to Pitchbook, which was a subsidiary of Morningstar. And they were, at the time, just launching their research product, which was equity-style research — but focused on private markets, because they had all the private market data.
I did that for about a year before I met Jesse [Proudman] and Sadie [Raney], who were my [initial] partners at Strix, and I just hit it off with both of them and saw the opportunity.
I’ve just been doing that for the last almost five years to the day now.
Blockworks: Is that wild to you?
Cordeiro: Yeah, nobody gets it.
We’ve reached the point now where our track record is long enough that LPS don’t even ask, but for the first three years, it was always, like, ‘Why would I give you money?’
We had like zero capital markets experience. You know the finance world.
It’s very pedigree-driven. And — in my experience — it’s not even performance-driven. It’s more like, ‘Do you check the right boxes and have the right relationships?’
It’s been a wild ride. The amount I’ve learned over the last five years is just astronomical.
Blockworks: You mentioned you built Strix’s original trading system from the ground up through today and that financial modeling is one of your favorite parts of the job. Why is that?
Cordeiro: Over the last five years, I just fell in love with stats — information theory, probability theory.
It’s just an interesting approach to markets where everything you’re doing is run through hypotheses tests a lot. A lot of people — even on the professional side — believe things [they shouldn’t].
If you just take a few hours or a day or two to dive deep on [complex digital asset topics], you realize that something [you’re looking into] may not even exist. Or that’s not really the case. Or it’s more complex than that. That’s a big chunk of what I find fascinating.
We have two funds now, and I am a co-PM [portfolio manager]. So, a lot of time is spent, working with the team through the current problem set, managing the risk for their portfolios.
That’s been a ton of my time over the last year … as you may imagine! … It’s more lately really been just a ton of LP [limited partner] calls taking up the bulk of my time.
Blockworks: What’s the LP sentiment like on those calls now? Compared to the fourth quarter or so.
Cordeiro: It’s better after January. You know people; It’s hard for people to ignore a 35% move.
Everybody’s asking themselves, ‘Oh, is the next crazy hype cycle here?’
Nobody wants to miss it this time around. So, it’s a little bit better — but FTX really was the final
nail in the coffin in terms of … A lot of these [institutional] allocator discussions are like 18-month conversations and getting to know each other. We felt like we were a few months away from those, and then FTX happened, and it seemed like unanimous pullback from allocators.
Now, it’s more like, ‘Oh, you know, we’ll circle back in six to 12 months when we’ve reprioritized.
Blockworks: You’re a crypto quant shop — when top LPs are cracking down on crypto due diligence. How do you handle that?
Cordeiro: Yeah, yeah, sure — think about the venture side. That’s much easier, from the allocator perspective, [to invest in], because they already have a [traditional venture] bucket within their broader portfolio.
It’s easy for them just to say, ‘OK, some of this is going to be dedicated to crypto VCs.’ They get that.
But a systematic hedge fund is an entirely different bucket for allocators. And a lot of allocators don’t even back traditional CTAs [commodity trading advisors] or systems. There’s a lot of allocators that just don’t get systems, so they don’t invest in them — which further shrinks down our funnel and universe of potential LPs.
But we are in a unique spot, where we’re systematic, and all anyone on the institutional side [has to do] is get approval from their investment committee like venture slices. That’s easy for them.
Blockworks: What about your market-neutral yield fund? Market-neutral fundraising is not a new narrative in crypto, right? It’s been done to varying degrees of success. In terms of success, what’s the appetite for that particular strategy for you all right now? How are you positioning?
Cordeiro: That’s right.
The appetite there is better than on the systematic side, because there’s — although this has changed a little bit over the last year — there’s long been this bifurcation amongst allocators. It’s either they don’t believe in the space at all, but they see the juicy market neutral yields, right? Like 20 to 30% for a TradFi allocator is huge, right?
Blockworks: Right — especially if the risk controls are there.
Cordeiro: Exactly. In crypto, it’s always like, ‘I don’t want 23%. I’m here for the moon!’
So, there’s those allocators and then there’s the true believers who are like, ‘Bitcoin’s going to a million dollars, and the whole asset class is going to be worth $5 to $10 trillion. So, I’m gonna’ take my very long beta bets through venture exposure.’
That’s why we pursue our strategy: There’s two reasons. It’s one, we keep getting questions about market-neutral in our LP conversations.
We saw this dichotomy between LPs and what is just an extremely technical team. We’ve always built out our own tools from day one. We don’t use anybody else’s software, and we already had a risk system built around blockchain — and data for the systematic side.
It hasn’t been easy, but it was an easier step for us to just build that out into — OK, we’re now monitoring risks from various smart contracts, and pulling data out of these things that we’re trading in. Which is where we see our edge, because we’re so technical.
Yield is yield, right? Anybody can go for yields and deploy capital to a liquidity pool. It’s not the most difficult thing in the world, from an institutional perspective. In the long run, your edge is going to come from your risk management.
How many of these blow ups do you avoid, right? Like the typical market-neutral, where you have wins every month — until one month you’re down like 50% because of some tail risk?
What we view as our edge and our interest here is that we think we have the technical capability to avoid a lot of that blow up risk, which, in the long run, will give us outsized returns.
Cordeiro may have been lucky, and he may have been smart, while serving his country.
The Strix chief investment officer has held onto an athletic build from his Army days and still finds himself lapsing into military jargon from time to time. He apologizes for it and moves on.
It’s no stretch to say that in his day job Cordeiro relies on skills he honed in the heat of battle, where he now flits between a mesh of monitors, looking for market indicators that might spell yet another volatile bump.
Keeping an eye on those indicators — understanding what delta and beta and sigma are, knowing how to control buckets of risk beyond leverage — is key to a trader holding their own.
And, of course, key to generating alpha.
Technology has come a long way since Cordeiro’s first Middle Eastern tour of duty, when Razr flip phones were all the rage back home and a figment of soldiers’ imagination in Iraq.
“Back then, I was a 19-year-old dude with no girlfriend and no reason to call back home — other than checking in with the parents every couple of months,” he said. “In Afghanistan, it was the same thing. Depending on where we were at, we’d have a few landlines.”
What was a blockchain?
Cordeiro now knows. His firm has had a pretty good run, outlasting competitor after competitor that unwound in the fourth quarter, if not before.
A source familiar with the matter said Strix is looking to raise another $50 to $100 million by year end in the firm’s systematic fund — as well as getting assets under management for its market-neutral yield fund to between $30 and $40 million by Dec. 31. The firm declined to comment on specifics of its fundraising efforts.
It’s not going to be easy and Cordeiro knows it.
But he’s been in more stressful situations.