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Andreas M. Antonopoulos, Chief Security Officer at Blockchain.info and overall smart bitcoin dude, recently announced on Twitter that he will be leaving the Bitcoin Foundation. Last month, Antonopoulos left the Foundation’s anti-poverty committee, but now he is leaving the Bitcoin Foundation altogether.     A couple of weeks ago, I resigned as head of the […]

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Twenty years ago, one bond-trading hedge fund grew from launch to over $100 billion in assets in less than three years. It saw yearly returns of over 40 percent. It was run by finance veterans, PhDs, professors, and two Nobel Prize winners. Everyone on Wall Street wanted a piece of their profits.

But by 1998, that firm was primed to expose America's largest banks to more than $1 trillion in default risks. The demise of the firm, Long-Term Capital Management (LTCM), was swift and sudden. In less than one year, LTCM had lost $4.4 billion of its $4.7 billion in capital.

The entire story is recounted in Roger Lowenstein's book, 'When Genius Failed', with details on the specific strategies and financial theories employed by Long-Term. It's an absolute must-read for anyone working on Wall Street, so we've summarized the basics for you in ten slides.

This story has all the players — the Federal Reserve, which finally stepped in and organized a bailout, and all the major banks that did the heavy lifting: Bear Stearns, Salomon Smith Barney, Bankers Trust, J.P. Morgan, Lehman Brothers, Chase Manhattan, Merrill Lynch, Morgan Stanley, and Goldman Sachs.

In desperate need of a $4 billion bailout, the crumbling firm was at the mercy of the banks it had once snubbed and manipulated.

Consider this a history lesson.

The idea for LTCM began with John Meriwether, who ran bond arbitrage at Salomon Brothers. He resigned from that bank after an employee was discovered deliberately deceiving the U.S. Treasury.

The groundwork for Long-Term Capital Management began when John Meriwether joined the investment bank Salomon Brothers in 1974.

Meriwether set up a bond arbitrage group within Salomon, and began hiring intellectuals to build formulas predicting market prices and finding outliers. The strategy was to buy or sell bonds when prices deviated from the norm, then wait for prices to converge again to make a profit. 

The Arbitrage Group became known within Salomon for its clique-y culture, its confidence, and its substantial profits. Soon Meriwether was put in charge of all bond trading. Bond arbitrage started to spread across the financial industry. When Meriwether was forced to resigned after an oversight failure with one of his employees, he built his new hedge fund around these same principles.

Meriweather set up his own hedge fund for arbitrage using mathematical models to predict prices. Stocked with industry veterans and respected academics, the firm launched in 1994 with $1.25 billion in capital.

By the 1990s, the number of hedge funds in the U.S. had exploded, arriving at about 3,000 hedge funds from only about 200 in 1968. But Meriwether had high expectations for his hedge fund that would set it on an entirely different level.

First, he wanted to raise capital of $2.5 billion. Second, LTCM's asking fees would be 25 percent of profits on top of an annual two percent charge on assets. Third, investors were required to keep their capital in for a minimum of three years. These standards were incredibly uncommon for a hedge fund to demand.

To justify these, Meriwether recruited respected academics who would bring credibility for the nascent firm, including Robert C. Merton, Myron Scholes, and David Mullins, then vice chairman of the Federal Reserve. Despite numerous rejections from investors including Warren Buffet, LTCM began to pick up speed, even adding foreign investors who did not traditionally deal with hedge funds. 

By February 1994, Long-Term Capital launched with the largest amount of funding ever at $1.25 billion.

In two years, LTCM had risen to over $140 billion in assets. The firm guarded their trades to the extreme, refusing to give details to any banks or investors.

In the first year, Long-Term made almost no mistakes, earning 28 percent when most other bond investors were losing money. Run by a team of all-star partners with record-level funding, Long-Term Capital Management was the new firm that everyone wanted to do business with. 

Long-Term's edge came from its experience reading models and a secure base of financing. The team was skilled in finding pairs of trades, hedging their bets, and leveraging smaller profits for a bigger payout. People didn't really think of Long-Term as a hedge fund, but as a financial technology investment company.

However, Long-Term was very secretive about its operations, to the point where banks found it extremely frustrating to work with them. Partners rarely gave specifics on what strategies they were employing, and scattered trades between banks to avoid giving away too much information to any proprietary desk. Long-Term usually gave a broad overview of models and the economy, but not much else. The partners even bought back photos used in Business Week to erase themselves completely from the media.

The partners were also known to be condescending and conceited, always putting their own interests first. But since Long-Term was flourishing, no one needed to know exactly what they were doing. All they knew was that the profits were coming in as promised.

CoinSummit's first day in London brought a wide range of discussions focusing on investment, finance and bitcoin's future.

The bitcoin exchange raised its latest funding from Barry Silbert’s notable investment vehicle.

Today, ANX announced that they would be issuing the world’s first Bitcoin Debit Card, with shipping to start very soon. The Debit Cards will be available first to existing ANX Bitcoin Exchange customers who have already completed all verification steps. The development of Bitcoin Debit Cards has been ongoing for many months across several different […]

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Bitcoin storage firm Netagio has today launched an exchange that allows users to trade bitcoin, pounds sterling and gold. The exchange offers users three order-books, allowing trades between bitcoin and gold, bitcoin and sterling, and gold and sterling. “[Investors] want to take advantage of the opportunities available from being able to trade between the asset classes […]

A regulated Bitcoin investment fund overcomes anonymity concerns about the virtual currency, says its director.

@coin_artist Hey @Coindesk @cryptobizmag @CoinTelegraph @BitcoinMagazine whose going to do a story on this? http://t.co/IhOw0XDfPW — TampaBay Bitcoineers (@TampaBayBitcoin) July 7, 2014 I have always been a fan of puzzles, but @coin_artist‘s latest cryptography mind benders were well beyond my reach. This complexity, however, is intended to force people to work together to achieve a solution. Here is the latest puzzle she released on twitter before deactivating her account until the solution was found. Reading the comments from redditors was the first sign that this mysterious mountain of a puzzle would require hours and days of work to even scratch the surface. @coin_artist shared the solution with me and I read through every page shocked by the amount of effort […]

The post @Coin_Artist’s Latest Dark Wallet Puzzle And The 32 Page Solution appeared first on Bitcoin Magazine.

JADA is a new advocacy group for bitcoin businesses in Japan that has industry and official backing.

What is claimed to be the world's first regulated bitcoin fund will launch on the island in August.

This report focuses on data and events in the second quarter of 2014 through to the present day.

Mathias Sundin, a 36 years old politician, Deputy Mayor of Norrkoping, former Member of Parliament, and entrepreneur from Sweden is running for the Swedish parliament. He is the first political candidate to only accept bitcoins for his political campaign. As he writes on his own website: To promote the spreading of Bitcoin and increase the […]

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Saturday, September 27th 2014, Bitcoin Co. Ltd will be hosting a Bitcoin conference in Thailand, regardless of the country’s inability to decide where they stand when it comes to cryptocurrency. Registration is free and open to the public. As if the people of Thailand needed another reason to invest in bitcoins, a few months ago […]

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I visited Los Angeles Bitcoin Incubator Bitropolis earlier this year, and I got to meet Steve Beauregard, the founder of GoCoin. While in his office in the scenic Santa Monica, CA,  I had a few questions for him– and he was kind enough to answer them. What is GoCoin and what do you guys do? GoCoin is the first e-commerce checkout solution empowering merchants to accept multiple digital currencies like bitcoin, litecoin and dogecoin. We guarantee merchants receive the fiat value of every transaction, and give them the choice of taking all or partial settlement in coins. What is your professional background? I’m a serial entrepreneur with a knack for identifying emerging technologies. In the early 90’s, I helped DIRECTV launch the […]

The post Q&A with GoCoin’s Steve Beauregard appeared first on Bitcoin Magazine.

The index was created by the investment firm to forecast "what may happen to bitcoin in the medium term".

Former US Mint director Ed Moy explains what's wrong about bitcoin regulation and how the community can fix it.