A WHOLE NEW WAY OF THINKING ABOUT MONEY. James Canning-Cooke is Head of Research at Mulberry Tree Capital, one of the risk-managed hedge funds investing in leading digital currencies such as Bitcoin and Ethereum. James went to Oxford University and networks with digital currency experts and key players in the sector.
I was a journalist at Channel 4 and the BBC, and then involved with a computer magazine which interested me in technology. When I left publishing I invested in real estate in Estonia. I also looked at Argentina and Russia, because their currencies had devalued and real estate was naturally well priced. In 2003 the best way to get to St Petersburg was to fly to Finland and take a boat to Tallinn and then another one to St Petersburg. I stopped in Tallinn for 10 years because it was a charming, historic, UNESCO listed old town and stunningly beautiful, a limited commodity. We raised money mainly through Scandinavian investors, and deployed over $60 million into a range of real estate projects in Tallinn. I sold that Estonian development company in 2008 and continued living there and to invest my own money in real estate. In 2013 I was selling my Volkswagen car and the potential buyer, a Russian, offered to pay me with Bitcoin. I did some research and said yes.
What did you discover about Bitcoin that convinced you to do it?
To my surprise I discovered that it was a hard currency I could exchange immediately into any other hard currency like dollars or pounds.

A technician monitors and maintains bitcoin mining machines at a mining facility operated by Bitmain in Ordos, China, on Friday 11 August, 2017. Photographer: Qilai Shen/Bloomberg
Bitcoins are not issued by a bank or backed by anything but mathematics and game theory, which in this case is the belief that other rational people value a commodity in the same way that you do. A Bitcoin is a long string of numbers and letters that exists in the cloud and takes the form of a public key and another string that is called a private key. Bitcoins are part of a network that a private key gives you access to, and every Bitcoin knows of the existence of every other Bitcoin, and every Bitcoin knows the total history of all of the transactions on the entire network since it started in 2009
Can you explain more?
Each Bitcoin is unique. A Bitcoin is also a network of computers that communicate with each other. Every 10 minutes the network agrees on the number of Bitcoins on each of the other computers and the network updates. That is called a block, and that block goes into the so-called block chain. So a Bitcoin is also a distributed digital set of accounts that records how many Bitcoins you have and all Bitcoin transactions.
Is it like a currency?
It has many of the attributes of a currency. A dollar for instance exists physically, and I can take it and give it. A Bitcoin can be used as a currency or as a store of value, like gold, but it does not need human interaction.
How much are they worth?
Today one Bitcoin is worth $7,000.
How do you get one?
It is a liquid commodity. You can open a trading account with a broker and buy it on the internet on a licensed exchange. Then you keep the password to access it safe and you can trade it almost anywhere in the world. Each Bitcoin is divisible into eight decimal points, so you can buy a cup of coffee or a car. In Japan for example it is legal currency, and 300,000 shops accept it.
How many Bitcoins are there?
Currently 17 million in circulation in the world. The inventor decided there can only ever be 21 million. Every day more are issued through the process called Bitcoin mining, but there is a tapering issuance until 2140.
How did Bitcoin come about?
A person with the pseudonym of Satoshi Nakamoto invented it in 2008. I think the actual inventor is the American Hal Finney. In 2008 there were only 20 people in the world who had all the necessary skills to invent this.
Why did he want to invent it?
To solve the problem of internet money; with no central authority, no bank, no controller, and no human interaction. Initially it was a direct response to the financial crisis of 2008. A Bitcoin cannot be devalued by central banks printing unlimited amounts, it is a commodity outside of a bank. Nobody knows what you have, nor can they take it from you, and all the accounts are numbered. In other words, now everyone is a Swiss Bank, and you have sovereignty over your own wealth for the first time in history.
Is buying a Bitcoin an investment?
A Bitcoin is an investment like any other investment. You can buy Bitcoin through an exchange or pay cash in a private transaction. I could meet a holder of Bitcoin in a café, put $1000 on the table and he would transfer some Bitcoin to me and I could see it immediately on my phone.
Is this legal?
Everywhere except in China and Saudi Arabia. They stopped Bitcoin in China because of capital flight. Japan and South Korea are now the biggest users.
How many different kinds of digital currencies are there?
Now there are more than a thousand, but many will collapse, because they go bankrupt when nobody uses them and they only have value when they are recognised to be of value. The big name ones are more likely to be around in a long time. You can see the top 100 cryptocurrencies at https://coinmarketcap.com/ Now Bitcoin has a market cap of $100 billion, Ethereum $20 billion.
Why are they so volatile?
The price has fluctuated wildly because it’s a balance of supply and demand, and they are a store of value and generate no income. In that way they are like digital gold, that is to say a non-material commodity that you can take across borders, and now they are beginning to get mainstream. If you have the password in your head or on a bit of paper you have the Bitcoin. Bitcoin is a non-material commodity with no nationality. If you have internet access you can buy and sell Bitcoin, and a lot of people believe Bitcoin will go up in value.
Are they very much traded?
Every day some $4 Billion is traded. Now there are futures and options, and due to client demand there is even a trading desk at Goldman Sachs.
What is the difference between Bitcoin and Ethereum for example?
Ethereum was started by a 19 year old Russian genius, Vitalik Buterin. It is a flexi-Bitcoin if you like. It is programmable money, and can do things like carry out contracts. Because they can do deals with each other Ethereum allows for what is called a tokenised economy. This is not just digital money, but clever money.
Is cryptocurrency successful?
It is controversial. Very few people use Bitcoin to buy things, and hardly anyone is using Ethereum; a lot of the overexcitement has gone, but many clever people are working on the next stage of mass implementation, whether it be for taxi sharing, insurance, stock markets, or solar electricity trading. It can be used for supply chain management for tracking containers, for example Maersk (a Danish transport and logistics conglomerate) has a deal with IBM (an American multinational technology company) for tracking their containers using the technology.
What does your hedge fund Mulberry Tree Capital do?
Mulberry Tree is a financial vehicle to buy and sell the top digital currencies at a profit. We trade high conviction positions in the top regulated digital currencies, so we mostly trade in Bitcoin, Ethereum and Litecoin, which is another version of Bitcoin. This year the technical factors indicated Litecoin was overvalued and we sold it short at a profit.

The beautiful city of Tallinn, Estonia’s capital on the Baltic Sea.

Bitcoin is becoming accepted in the retail environment.

The American computer scientist Hal Finney was probably ‘Satoshi Nakamoto’.

A Bitcoin ATM

The Russian-Canadian Ethereum founder Vitalik Buterin.

Bitcoin compared to the size of the gold market.
What about 50 years from now? Is this a new way of having money?
Most Bitcoin users are young people under the age of 35, and 36% of young Americans intend to buy a Bitcoin at some time in the next year. It is a youthful phenomenon to be able to bank on your phone, and digital natives have no problems using it.
So this will grow?
It is very possible that within ten years several sovereign nations will have their own bitcoins.
Will there still be Euros and Dollars?
Yes. For me it is another payment channel alongside PayPal and my bank account. For example, when I was in Kiev and needed to buy a plane ticket my Lloyds Bank card was not working, and Paypal is not accepted in Ukraine. I could only do the transaction in Bitcoin. Air Baltic used to accept it as payment, and Peach Aviation still does in Japan, but the volatility makes it a nightmare for them.
Will it always be this volatile?
As more liquidity enters the market the volatility will come down. It is a store of value because it is not correlated to anything else, so if the world economy collapses again it will go up in value..
How many people use it in the world?
Only 5-10 million people have a cryptocurrency app on their phones, which is a very small number.
What are the risks of owning Bitcoin?
The major risk is that the value will go to zero if everyone stops using it. This is less likely than Bitcoin going up. There is a risk of total loss, but Bitcoin has a first mover advantage that makes it less likely to go bankrupt. There is no risk of being defrauded, but if you forget your password then you have lost everything. Your password must be stored safely. It is a window, a key to transact, that exists within the ecosystem of money.
Will employees be paid in cryptocurrency in the future?
It is possible, as the markets become more regulated and the volatility goes down
Is everyone a fan?
Not everyone, no. Warren Buffet said: ‘Bitcoin is probably rat poison squared,’ so he is not a fan. But Christine Lagarde, Managing Director at the IMF, is a big fan, as is Abigail Johnson, the CEO of Fidelity Investments, and it is accepted in their head office cafeteria.
Is cryptocurrency a refuge for illegal trade?
There is illegal trade in Bitcoin, as there is in cash, but you can do a taint analysis on the previous Bitcoin transactions. A criminal would be crazy to use Bitcoin because it’s an open network. When you try to cash out and a real world identity becomes associated with a Bitcoin address then you can be tracked.
Is it a bubble?
The retail investor bubble has burst, and pure speculation made it go down dramatically from a high of $19,783, but at some stage limited supply will make it go up again. For us, trading the volatility is a good thing, with many similarities to a traditional commodity or foreign exchange trade.
Why not just use dollars or Paypal?
Bitcoin is a whole new way of thinking about money, and major institutions are moving in. Compared to other insecure values this has international exchange value, and it is a store of value across borders. It has many of the features of offshore banking, which is being closed down all over the world, and corrupt governments and central banks can’t take it away from you. The value of a Bitcoin is debatable, but nevertheless we think $6 Billion has gone into cryptocurrency from institutions in the last six months, and remember, there are about a billion people in the world who don’t have access to banks, but they do have access to phones. With cryptocurrency suddenly everyone is enfranchised. It allows very poor people to get into the world of commerce, and the small farmer or businessman to communicate his products all over the world, so it has real social value.
London, August 2018
ENJOY THIS INTERVIEW? SHARE IT WITH A FRIEND.