Joshua Peck, the founder of TrueCode Capital, answered our questions about his future projections, the cryptocurrency market, and the company. He utilizes a systems approach to portfolio management that leverages his deep quantitative background in financial engineering, machine learning, and applied mathematics. He built the firm for his family first and now taking on other families to help them navigate the often dangerous waters of cryptocurrency investing.
What is your financial and crypto background before founding TrueCode Capital?
I came from a background in technology and engineering. During my early career, I built internet businesses using my technology and applied mathematics background. Those businesses created the liquidity events to support the founding of a first-generation family office, where I began investing in crypto and applying quantitative strategies to the crypto asset class.
How did you decide to establish TrueCode Capital? What is the story behind it?
I founded TrueCode Capital because I saw too many high-net-worth families losing money and sleep through their crypto investing. I had developed something that worked for my family office that fit the needs of family wealth, so I have opened it up for other families to invest with us.
What kind of technologies are you utilizing while advising your customers?
We operate a quantitative hedge fund, which uses sophisticated computer models to make trading decisions on our portfolio. To do this, we apply layers of statistical optimization methods, machine learning techniques to create trading decisions.
There are many cryptocurrency stealer malware around. Are you providing extra security solutions for your customers?
Cryptocurrency theft is a real concern. We have created a cryptocurrency risk model that we use to assess the potential risks of the asset class. Ultimately, we cannot eliminate all risks, but rather we can balance the risks in a way that is acceptable for holding large crypto allocations. Cybersecurity is one dimension of that risk, but it extends far beyond that.
How do you avoid potential losses when the crypto market crashes? Does cryptocurrencies’ ongoing decline affect your company’s future plans?
Our fund seeks to limit our losses by using a computerized trading model that exits the market when it enters a downtrend. This has worked well during the recent crypto bear market. Nothing about our thesis has changed. This crypto bear market is startlingly similar to past bear markets, so we are executing our systems as per normal.
What do you think about the legislation of cryptocurrencies in the US?
Crypto regulation if done well will be a boon to the industry. There are trillions of dollars on the sidelines at the institutional level that cannot enter the asset class until the regulatory regime becomes more clear. We very must look forward to the impact that greater institutional participation could have on prices.
Do you think the way the US approaches cryptocurrency will affect other countries’ future plans?
The US should be leading the way in crypto, sadly they are not. The US runs the risk of falling behind other countries in the crypto industry if they do not provide regulatory clarity to the industry. At the moment, several states in the US are leading the way, which is causing them to have a crypto boom, but the US needs a consistent framework to compete globally. After all, crypto firms are very global and will seek better locations to operate their business if it is advantageous to them.
It looks like people in developing countries are more interested in trading cryptocurrencies. How would you evaluate this situation?
Crypto is especially exciting for those in developing countries because they don’t have access to high-quality financial institutions like we have in the US.
How do you see the future of cryptocurrencies? Do you think the decentralized system will be the end of the current banking system?
The future of crypto is exciting. I don’t believe crypto will replace banking, but rather lead to something better than what we currently have for banking today. For example, email didn’t replace the postal service, but it enabled new and interesting forms of commerce. This is a pattern in emerging technology, where rather than replace the existing system, it empowers a new one.
Do you think the decentralized banking system is more secure than the current banking system?
The decentralized banking system is still very emergent and it is not uncommon for there to be software bugs in the smart contracts that create losses for customers. At this point, the decentralized banking system may be theoretically more secure than traditional banks, but in practice that is not true. Billions of dollars in losses have been realized by investors who trusted in decentralized finance only to become victims of a rug-pull scheme or a technical glitch.
Do you think the trust in cryptocurrencies has been shaken after the FTX crash? Do you think we could see a similar incident in the future?
In the short-term, the FTX failure has shaken up the market, but this is nothing new. Crypto exchanges have failed in the past and more will in the future. The key is to understand how and why people are losing money in crypto and take steps to reduce your risk of loss.
What do you advise for the people who never invested in cryptocurrencies? What are the most common mistakes the majority of beginners do?
Beginner crypto investors need to slow down. It’s easy to get excited hearing about all the money others are making and start following hot tips from social media, but be patient. The crypto market cycle lasts 4-5 years and 90% declines are common, so there is no reason to rush. Be thoughtful and begin accumulating a position over a period of months or years that can help you achieve your overall portfolio goals.
Do you think it is the right time to invest in cryptocurrencies? Can you share a bit of insight?
The FTX failure has created a fantastic buying opportunity for investors looking to enter the market, but we are often reminded that good prices can always get better. A thoughtful approach to crypto investing could be to shift a few percent of the growth equities allocation to crypto over several months. Crypto is best seen as a growth asset, similar to NASDAQ firms or Tesla stock, so replacing a small percentage, perhaps 1-5% of your portfolio with high-quality crypto assets that have survived several market cycles is a desirable strategy employed by many investors. Notably, crypto whales have added $800MM to their stockpiles this week, so those in the know are seeing this as a buying opportunity.