The secret is out — Yale has jumped into crypto

Oct 8, 2018

Yale is home of the second largest university endowment in the country and generally regarded as one of the best. They recently invested in Paradigm, a new $400 million cryptocurrency fund led by Matt Huang (former Sequoia) and Fred Ehrsam (co-founder Coinbase). Previously, Yale secretly invested in Andreessen Horowitz’s crypto fund as well.

The $30 billion endowment is slated to have 60% of their assets allocated to alternative investments in 2019, which now includes cryptocurrencies. This move should be an important inflection point for the industry.

Yale is closely watched, and many times mirrored, by other endowments, foundations and pensions. The university endowment’s participation in crypto will lend credibility, while providing the catalyst needed to get more institutions in the game. There is an element of “If it is good enough for Yale, then it is good enough for us.”

For those that don’t know, institutional investors are a very different animal than high-net worth individuals or family offices. The large organizations tend to write more meaningful checks, conduct deeper levels of diligence, and require more robust governance rights and terms. As each new institution participates, the industry will mature at an accelerating rate.

Here are a few more milestones that will come in the future and have meaningful impact:

  1. There are large consultants that advise major institutional investors. As these consultants begin to “approve” crypto funds for investment, there should be an influx of capital into the market.
  2. A public institution, like a public pension, will invest in cryptocurrency or crypto fund. All of the institutional investors to date have been private organizations. The first public institution will unlock a whole new bucket of capital.
  3. A sovereign wealth fund announces they have bought a significant amount of Bitcoin. Given the fixed supply of the digital asset, this announcement would likely drive other nation states to seriously look at Bitcoin and begin buying out of fear of missing out.

Crypto is starting to hit the mainstream investment world. As this trend accelerates, it wouldn’t surprise if we saw $10+ billion enter the market over the next 6 months. These are serious dollars that are managed by some of the most sophisticated investors in the world.