162 Interactions, 4 today
The co-founder of a hedge fund says he is reserving his investment capital for when the cryptocurrency market continues its parabolic rise.
Following the May crypto market crash, crypto hedge firm Nickel Digital Asset Management cycled into a cash position.
According to Bloomberg, the $200 million crypto hedge fund led by JPMorgan and Goldman Sachs alumni redeployed its capital in anticipation of another explosive price run for cryptocurrencies.
Prior to accumulating funds, Nickel Digital concentrated on cryptocurrency arbitrage possibilities coming from price discrepancies in the spot and derivatives markets.
Indeed, crypto arbitrage trading apparently provided double-digit annualised gains for institutional investors with adequate money to profit from these short-term price differences. Because the emphasis is on price disparities rather than price activity, these trades are market neutral rather than directional.
Commenting on the fund’s investment thesis, Nickel Digital CEO Anatoly Crachilov told Bloomberg: “We don’t take directional bets, so whether Bitcoin goes up 300% or down 70%, we will seek to capture arbitrage opportunities from market dislocations,” adding:
“Our market-neutral, low volatility strategy is designed to provide positive returns irrespective of market directionality. It’s meant to make a transition into the crypto market easier for investors with lower risk tolerance.”
Nickel Digital allegedly generated 29 percent profits at 3 percent volatility, considerably less than the market average of 78 percent for crypto assets. However, Bitcoin’s (BTC) blow-off peak in April, followed by altcoin collapse in May, has allegedly upended these arbitrage possibilities for hedge funds such as Nickel Digital.
Bitcoin’s 50% drop from its all-time high of $64,000 prompted a $9 billion cascade of liquidations in the futures market, mostly for over-leveraged longs. Altcoins have also plummeted by more than 70%, and price movement has stayed sideways, with regular 10 to 15% drops.
For Crachilov, it is all about playing the waiting game, for now: “June will be remembered as a cash-rich, wait-and-see month.” The Nickel Digital CEO also stated that the current market downturn is not out of the ordinary for investors long in the crypto business.
According to the CEO of a crypto hedge fund, institutional investors are beginning to perceive crypto investments as less of a reputational risk. Indeed, banks in the United States and Europe are beginning to provide direct access to Bitcoin for both individual and institutional investors.
Alex Mashinsky, CEO of cryptocurrency loan platform Celsius, told Cointelegraph in June that he believes Bitcoin will hit a new all-time high of $160,000 before the end of the year.