Summer 2013
Nine months old, and Legion was already the dark horse favorite of the financial world. Bitcoin had begun a strong upward trajectory in March, shooting up steadily from the $30 range to over $110 by August. Legion averaged around 60% allocation in bitcoin over that time, making it by far the top performing hedge fund of the year. The team couldn’t be more pleased with the fund’s performance.
Except for Gavin. Rather than enjoy the success, he worked diligently to gather data that was required to finish the research Viktor had begun. Gavin put in hundreds of orders a day to study the cryptocurrency’s price movements. Bitcoin was uniquely suited to this research, since orders were completely transparent and devoid of the manipulations of thousands of HFT firms. There were no feints and counter-feints to muddy the data.
Gavin worked with a couple of analysts at another firm interested in bitcoin to parse the results. Two virtual machines sifted through all the data with a program designed by Viktor, hunting for a pattern. He was sitting at dinner with Mila, a rare night out for them, when he received a call from a Paris number.
A hushed voice came over the receiver, “I think we’ve got it. Jean-Philippe is double checking my work right now, but he thinks it looks good. How do you Americans say… we hit pay dirt?”
Gavin laughed at the Frenchman’s use of the expression. Mila, looked up from her meal, glad to see Gavin looking cheerful for a change. She wondered why he couldn’t enjoy their success like Rohan and the rest of the gang.
“Let me call you back, I’m at dinner. This is great news.”
“Yes, friend, indeed it is.”
After impatiently working through the four remaining courses, Gavin excitedly called Donier and Bouchaud. They discussed the results in detail, but the technical data could be boiled down to a fairly simple equation, expressed as market volatility divided by the square root of trading volume. When the metric crossed certain thresholds, it was a clear sell signal, indicating a coming drop in bitcoin prices.
Use of this metric would go on to solidify Legion’s reputation for masterful market timing. The firm had Solomon’s touch even in traditional securities. Their biggest bets: Chinese equities, bitcoin, and companies with savvy Investor Relations were all headed skyward. The latter trade had been Austin’s suggestion. He excitedly ran into the daily huddle one day, talking about a PR firm Netflix and Tesla had recently contracted—apparently the best in the business. They bought some call options to appease him and it became their highest yielding trade for the quarter. Austin took great joy in seeing his name atop the relative returns leaderboard. Luckily for the rest of the team, he spent most of his time back in the states, plugging the firm in all the major media outlets. The demand from American investors forced them to open up a feeder fund there, which he ran as a one man operation.
While Rohan, Austin, Eric and Jason were basking in their well-deserved glory, Gavin found himself more and more drawn into his own world. The isolation was necessary in some respects, for the work he did demanded it. Even Mila’s comforting presence failed to resolve his discontentment. What bugged him, was that their financial success was not in any way correlating with success in the greater war. They were losing it on all fronts. Never before had a larger percentage of the global population been more dependent on the mechanisms of state for their survival. From food stamps in America to food aid in Africa. Water supplies, energy, and security; everything was becoming more and more dominated by organs of the state. Police and martial organization grew in size and developed a meaner attitude while the state’s bureaucrats seized complete control of industry and financial markets. Legion was making money, sure, but they were losing the real war by a landslide.