- Digital currencies are the latest competition Wall Street faces for the young talent that fuels their businesses.
- The fortunes made in crypto last year have sparked a bull market in new hedge funds.
- The mania around the rise of cryptocurrencies has parallels to the dot-com boom of 20 years ago.
Two days after Chris Matta earned a prized promotion at storied investment bank Goldman Sachs, he shocked his bosses. He decided to walk away from it all.
It was mid-December, and Matta had just been told that after six grueling years toiling at Goldman, he had made vice president. Matta, who oversaw billions of dollars in investments in the wealth management division, had just climbed a rung of Wall Street's hierarchy and was in line for more pay and status.
But Matta, 28, had a new goal in mind. All throughout 2017, the bitcoin he owned exploded in value. With the help of two former colleagues from Goldman, Matta wanted to create an investment vehicle to take advantage of the intense interest in cryptocurrencies. He couldn't wait.
"It's safe to say, you leave a good amount of money on the table walking away from Goldman,'' said Matta, who resembles Jared Dunn, a character from the HBO show "Silicon Valley." "But I saw it as a calculated risk.''
Matta's unusually swift departure — he didn't even stick around to get the bonus he had earned that year — is a sign of the powerful lure of cryptocurrencies. Fortunes were made last year, when a single bitcoin surged from under $1,000 to nearly $20,000. That sparked a bull market in new crypto-based funds jockeying for a piece of the action. Matta declined to say how much his bonus would have been.
Digital currencies are the latest competition Wall Street faces for the young talent that fuels their businesses. In a previous era, thousands of the best and brightest young men and women flocked to Wall Street for a shot at making a fortune. Those who became managing directors — a level or two above vice president — could expect to earn millions of dollars a year. Some truly struck gold, such as Andrew Hall, a Citigroup commodities trader who made $100 million in 2008.
No place epitomized Wall Street's allure quite like Goldman Sachs, a 149-year-old investment bank that had been the most profitable securities firm in history. The firm has produced so many senior executives and public officials, including two Treasury secretaries in the past decade, it's jokingly referred to as Government Sachs.
After post-financial-crisis regulations curbed risk-taking and pay, for some the banks have turned into training grounds where valuable connections are made before leaving for something better. Now, the smart kids are leaving Wall Street to hit it big.
When Matta's boss — a Goldman partner and suspenders-wearing embodiment of old-school Wall Street — heard about Matta's decision, he summoned him to his office.
"They called in the CEO of my organization, and he said, basically, 'Are you crazy? Do you realize the risk you are taking here?''' Matta said. "'You are giving up on your bonus!'"
His managers had a counter-pitch: stick around until February to collect your bonus.
But Matta and his co-founders, Ali Hassan and Michael Kazley, all under 30 years old, wanted to set up shop and start taking in client money by Jan. 1. So while his former colleagues were enjoying the holidays, Matta and his friends were pouring their life savings into setting up their new firm, Crescent Crypto Asset Management.
"In the crypto world, every month is like a year in the equities space,'' Matta said. "The amount of things that would change in that time, the number of funds that would come to market, it would just be a much more difficult landscape for us if we were trying to get things up and running in February.''
Matta, who grew up in Bayonne, New Jersey, and studied economics and finance in college, started at Goldman Sachs in 2011 in the bank's summer analyst program. He had roles in risk management and big data technology solutions, and then shifted into the bank's wealth management division, eventually helping oversee $7 billion in a philanthropy fund and a trust portfolio. By 2016, Matta became intrigued by bitcoin.
"At Goldman you're always looking for alternative asset classes, and I said, maybe this is an alternative investment that we should start to take seriously,'' Matta said.
The mania around the rise of cryptocurrencies has parallels to the dot-com boom from 20 years ago. Then, too, it wasn't uncommon for Wall Street bankers to head west to Silicon Valley in search of fortunes. (Amazon founder Jeff Bezos had a series of finance jobs, including at a Deutsche Bank predecessor and quant hedge fund D.E. Shaw.)
The rise of cryptocurrencies has sparked a bull market in hedge funds tied to the assets. While only five existed before 2013, more than 200 were created since 2017, according to Autonomous Research.
By the time bitcoin and other coins began their dizzy ascent in 2017, Matta was known at work and with family as a crypto expert. "People were asking us about it nonstop, saying, 'I'll give you $50,000, can you do this for me?'''
The three founders are taking what they've learned on Wall Street and applying it to an asset class that was created to disrupt financial institutions. Their inaugural product is an index fund made up of the 20 largest coins; they charge 2 percent of assets under management.
Gains have been harder to come by this year. Concerns over regulation, fraud and high-profile hacks drove bitcoin down at the start of the year, losing more than half its value in January. It has since whipsawed investors, trading between about $6,000 and $10,000.
Matta is undeterred. He believes that digital currencies and the blockchain technology underpinning it have the potential to transform finance in ways that are hard to imagine.
"It's either going to zero, or it's going magnitudes higher,'' he said.
Still, their little company has already had some success. Matta said they have made progress toward their goal of attracting $50 million in assets this year. They've hired five employees for a research desk. They are also in discussions with established trading firms seeking to make strategic investments in Crescent Crypto, Matta said.
Ironically, the three men have Goldman to thank for their success so far. "The Goldman brand is obviously very strong; people respect its people," Matta said. "It gets you in the door in a lot of cases."
And the investment bank is still a strong lure for talent, attracting a quarter of a million annual applicants for a few thousand positions. The talent system at investment banks relies on a steady stream of hungry young men and women to populate their trading floors, and most end up leaving. Matta said that when he left, he was one of the last members from his summer program.
He figures that even if crypto goes bust or his fund fails to get traction and his savings are wiped out, he's gained invaluable connections and experience. In that case, Goldman could welcome him back, although he would prefer working for a start-up, he said.
"I don't regret it at all,'' Matta said. "It's been the most exciting few months of my life, honestly.''