> The problem is that when they fail, their clients lose money, and they don't (yes, there are some career risks, but they are minor).

You can lose your deferred compensation, which is very common at both hedge funds and banks once you start earning more money.

> Thankfully, now it is easier than ever — just show that you can consistently earn money by trading, and you'll get calls.

Have you ever tried raising institutional money? It's not that easy even if you have a good track record. Many times it will come under extremely investor friendly terms and often it will be a SMA rather than an actual investment. Of course you can raise millions of F&F money, but the economics for most strategies don't work out until you get into the 9 figure range.

I have the opposite problem — my strategies are scalable up to some AUM, and I am constantly looking for ways to raise this limit, meanwhile rejecting new clients :)

I'm in the tech heavy and completely unscalable space. It fits my personality a lot better, but that's why we're not a hedge fund.

Yep, you are in HFT. I don't have the means to compete in traditional HFT, but I am trying to be the fastest guy in Bitcoin venues. :)

Why does it matter if it's a separately managed account?

> when they fail, their clients lose money, and they don't

This is limited liability. It applies to employees and start-ups, too. (If a Boeing employee makes a shitty engineering decision, we don't put them in debtor's prison. Similarly, if a start-up fails we don't pillory them.)

We limit investment in start-ups and hedge funds to wealthy individuals, in part to protect the masses from this principal-agent problem solving.

> The problem is that when they fail, their clients lose money, and they don't

You think they should pay up if their customers has realized (or unrealized?) losses?

> Thankfully, now it is easier than ever — just show that you can consistently earn money by trading, and you'll get calls.

No biggie, just download HedgeTrader Pro from pirate bay and get started, right?

No. Just open an account with Interactive Brokers or anybody else. Or, go to GDAX or other Bitcoin venues if you don't have $10k lying around (their data feeds are excellent and free).

It's going to be very difficult to do any sort of proper risk management on an account size that is smaller than five figures (and five figures is already very difficult).

I'm not sure if you were being sarcastic, but saying "just open an Interactive Brokers account" is really closer to the sink side of Sink or Swim philosophy. And trading with less than $10,000 on GDAX sounds like a great way to blow out your account (I don't trade forex so I don't know personally, but I'd be concerned about the drawdown periods on that kind of capital...most of the forex traders I know who do it outside of a firm typically work with $150k+ in capital for this reason).

Is cryptocurrency market making/scalping something you personally do?

Yes, I mostly do market making.

> The problem is that when they fail, their clients lose money, and they don't.

This isn't really a problem - they only take accredited investors because of this risk.

VCs also lose money when startups fail, but they don't ask the founders and employees to pony up past salaries. Understanding of the risk of failure with no recourse is a prerequisite to investing.

Yes and no. Incentives have to be right but you can't ask your physician to harm himself if he doesn't cure you. "Sharing the pain" should be kind of asymetrical if you want anyone to take the job.

Physician doesn't get paid more if you're healthy. He's paid more if he tries longer (in time) or better (more exams). (Ofc the analogy stops here and we're not really discussing physician compensation). Big difference: you don't get compensated for risk taking while not suffering the consequences if not.

Physicians get paid more if you remain sick.

There is no shortage of sick people.

>yes, there are some career risks, but they are minor

I wouldn't refer to getting put on a blacklist as minor

Getting paid 5M. one lucky year while taking maximum risks and getting banned after - then doing voluntary work for the next 9 years > 10 years of low risk, 250k earnings.

what if you get banned without making alot of money?

There are other countries to live and trade.

A problem for who? People who feel the world should work differently? :-)

For what reason is it now easier than ever?

Low barriers of entry. Availability of low-cost market data sources. Bitcoin venues as the perfect training ground.

How would you go about getting started in Bitcoin trading?

coinbase.com is the way the IRS wants you to do it, and it's easy. And their new gdax.com exchange is fun to watch. Do it ASAP as the BTC price is getting pretty high pretty quick. On a side note, your Econ + minor CS is a good idea. But get your BS in CS while you're at it. Can you imagine looking back and thinking that was time wasted?