How Crypto’s Original Bubble Boy Rode Ethereum And Is Now Pulling The Strings Of The DeFi Boom
OLAF CARLSON-WEE rode 2017’s “initial coin offering” craze to become one of crypto’s top venture investors. Now he’s raking in hundreds of millions, from a blockchain rage called DeFi, which promotes the fantasy of democratized financial services.
"On a frigid, windy day in January, Olaf Carlson-Wee is settling in for a long Zoom call from his $10 million Soho loft in Manhattan, reflecting on how far he has come in the four and a half years since Forbes featured him on its cover, labeling him the poster child for the cryptocurrency bubble of 2017.
Back then, a speculative frenzy of hundreds of initial coin offerings (ICOs) pushed the cryptocurrency market to well over $100 billion in value as greedy fools bid up junk tokens backed by little more than a white paper and some quirky computer code. Then 27, with three years of Coinbase work experience under his belt, Carlson-Wee was considered a sage. He had started a San Francisco–based hedge fund called Polychain Capital that was backed by Andreessen Horowitz, Union Square Ventures and Sequoia Capital, and his fund’s assets had swollen from $4 million in September 2016 to $200 million.
Today, despite recent turbulence that saw bitcoin and other cryptocurrencies fall 30% to 50% in a matter of weeks, the market for them is still close to $2 trillion, and Polychain’s assets are $5 billion—up 125,000% since inception. Carlson-Wee just closed a $750 million raise for his third venture fund, led by Tiger Global Management and Singapore’s Temasek Holdings, two of the smartest and most successful investment firms on the planet.
“We had a lot of interest. Many, many hundreds of millions in demand more than we raised,” boasts Carlson-Wee, now 32, clad in a lime-green tie-dyed T-shirt, running his fingers through his spiky, bleached blond hair.
"Whatever the ideal, in practice, DeFi is a speculator’s paradise...even after crypto’s recent correction, the amount at risk stands at nearly $80 billion."
Carlson-Wee’s net worth has grown to an estimated $600 million because among crypto investors, he has an uncanny knack for deftly navigating a market chronically infected by hyperbole and assets without any discernible intrinsic value. . .
[...] One of the keys to Carlson-Wees success has simply been being early. He met Ethereum founder Vitalik Buterin, for example, when the then-19-year-old briefly worked at Coinbase in 2013. That was just before Buterin wrote his revolutionary blockchain white paper, which one-upped bitcoin by creating a multipurpose computing platform based on so-called “smart contracts.” These agreements have no conventional legal standing, but because the terms are blindly enforced by computers, they are more immutable. Without smart contracts there could be no ICOs or NFTs.
In 2018, at the Web 3.0 conference in Berlin, Carlson-Wee met MIT research scientist Harry Halpin—the co-creator of a super-privacy protocol called Nym. Halpin was frustrated by traditional VCs’ reluctance to back him. Says Halpin, “This smartly dressed young fella came up to me and said, ‘We at Polychain are interested in funding subversive technology.’ ” Polychain led a $6.5 million round for Nym last July, just before the startup hired Chelsea Manning. . .
Polychain’s most ambitious investment foray to date has been its backing of a phenomenon known as decentralized finance, or DeFi, which uses blockchain technology in peer-to-peer applications. . .
The total market now amounts to $78 billion, up from $10 billion in January 2020. . ."
Polychain is among a handful of big hedge funds and VCs including Paradigm, Bain Capital Ventures and Pantera, which, behind the scenes, centrally control many of the biggest decentralized platforms
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