The uncertainties of 2022 financial markets continue to drive retail investors to give their money to someone else; mutual funds, softwares or other humans in the hope they will find a way to make it work. In many cases the warriors who decided to whether the storm are the wall street bets veterans (GME ring a bell?) who in some cases made enough cash on their risky bets, to continue to trade in this high-risk environment.
The increased uncertainty in today's markets only exacerbates the chaos, and with it, the market opportunity. Retail investors in today’s markets are faced with two tough choices: (a) compete in the wild-west themed casino called ‘Robinhood’ or (b) dump their cash into one-size-fits all solutions like Titan Invest, an investment advisor that makes smart, transparent albeit unpersonalized, decisions. With their recent freeze in growth powered by aggressive churn, I won't even mention Wealthfront and Betterment who offer an even further degree of distance with unpersonzlied, unhhuman (alogirthmic) investment models. I like Composer Trade, who are taking a similar approach to ours although I am skeptical of the friction their model imposes.
Crysp leverages an ideal intersection of timing and opportunity by combining several factors: (1) Moat. Deep technology powered by years of social, highly-personalized algorithmic trading models. (2) Team Experience. Founded by second time founders, hedge fund managers and quant engineers there isn’t a team in the world better suited to tackle this problem. (3) Smart money has been doing this for decades. It’s not even algorithmic trading, it’s basic hedging. (4) Trends. Choice (aka active investing), hyper-personalization and risk-awareness.
The problem is simple: there isn’t a way for retail investors to get the type of market-beating risk-adjusted returns that hedge funds and their clients have access to, while maintaining their individual autonomy and liquidity. When we first started thinking about this problem, the Crysp fund had been running for a full year, leveraging social media signals to craft hyper-personalized investment strategies around individual finfluencers (financial influencers). This strategy resulted in 97 trades per year, with roughly half being wins, representing a whopping 67% return on investment, beating the S&P 500 by 51%.
Today, Crysp is no longer an asset manager that allows friends and family to trade our quant strategies. Today Crysp let’s you explore a feed of backtested stock alerts, build auto hedges on-the-fly, and review backtested performance of those hedges against the underlying security to make sure you’re making the right bet. Over time this allows users to generate better risk-adjusted returns: less risk, more money, more autonomy.
Robinhood is Napster and Wealthfront is Quibi
Wealthfront has established itself as the go-to for roboadvisors, using software like direct indexing, auto rebalancing and tax loss harvesting to outperform the market. Users set a risk profile, and the software does the rest. While the Wealthfront idea makes sense there growth seemed to have peak at $21B AUM. Wealthfront charges only 0.25% of every dollar it manages for accounts with over $5,000. Everything below is free but the company still has steep expenses to support those accounts. The lack of a technological moat, combined with it’s high customer acquisition costs, creates the perfect setup for a long-term downward trend (or buyout). Wealthfront continues to apply technology to support the old paradigm of financial advisors, and while this has a time and place, users are demanding more: higher personalization, higher returns.
Robinhood, on the other hand, offers the highest level of personalization possible. You decide, they execute, you’re the business model (PFOF). We all knew how Robinhood would play out, peak in a bull market, crash in a bear market. The reason is clear, Robinhood is not investing, Robinhood is gambling. And just like your favorite casino, their business model is built upon you losing money.
The math is simple: (a) Robinhood makes money when you trade more (more volume, more money). (b) when you trade more you lose money (more volume for you more losses for you). There are many reasons why high volume = loss for retail investors, but just to give you a simple explanation: to win in investing you need an edge (there is a losing end of every trade). In high (or mid)-frequency trading your edge is primarily technical analysis, signals, and putting together trends - computers are better than you at this. When retail investors try high-volume trading they are at a natural disadvantage, and this is what Robinhood advocates for.
With the current market dynamics the thrill seekers have cashed out, Robinhood is losing customers by the day.
Robinhood accelerates a chaotic market, and benefits from the mess. It uses game mechanics to get less sophisticated traders to trade more.
Crysp lives in the intersection of Active Investing, and Smart Investing. Making sure users continue to make their decisions in the stock market, while benefiting from market-beating risk adjusted returns. Want to YOLO into Gamestop? Sure, just let us reduce your exposure by 60% and throw in a solid beta hedge. Want to go ALL IN on HERTZ? No problemo, let’s sneak in a massive industry short in case the auto industry goes to hell.
Crysp aligns incentives with its users. Similar to the hedge fund models, we make money if you make money. We’ll MAKE you invest smart so that we both gain.
Crysp is simple. No one wants to hear about Sharpe Ratios, risk-adjusted returns and hedges. Crysp just makes it work. Keep doing what you’re doing (on Crysp instead of Robinhood) and we take care of the behind the scenes mumbo jumbo.
Crysp is automating what smart investors are doing. The 1% of fintwit investors who know how to leverage the social sentiment to create market-beating strategies have been doing this for years: understanding finfluencer strategy, mining for alpha, and building their own strategy around it. We’re just using algorithms to automate the whole thing at scale. Because we all love democratization.
Crysp operates in a $21T market. Financial markets have not seen a Crysp-like innovation since index funds. The market is chaotic, and hungry for a change.
Yours truly, Dolev
p.s. - thanks to Packy from Not Boring for many references and trends including the beautiful wf and rh analogy.