It has never been a better time to provide money on crypto hedge funds.
That is according to Chris Solarz, the Chief Investment Officer of Digital Assets in Amiis Capital, a firm that runs a Crypto-focused fund-means a funding that specializes in providing capital to various currency managers.
“This is the Golden Age for the investment of the Crypto Hedge Fund,” said Solarz, who has been responsible for nearly $ 8 billion in allocating to the firing cliffwater firm, in an interview with CoinDesk. “It’s a stars alignment. This beta, this secular tail … Blockchain altogether has this potential. At the same time, the universe of the money manager is so hard that I feel like I’m shooting fish in a barrel who can choose winners.”
Crypto markets are still before that money managers can run the same trading techniques they used 35 years ago in Tradfi, when the fence funds were just emerging, Solarz said.
Only the 127 fence funds existed in 1990, managing nearly $ 39 billion; By 2024, those numbers had saved more than 10,000 funds that managed $ 5 trillion in property. In other words, the sector has become more competitive – and the market has become more difficult.
Solarz’s thesis is the crypto sector (which counts approximately 1,650 hedge funds governing $ 88 billion on property) is currently 10 times less competitive than traditional markets, to the point that money managers are able In Commoditization.
“I find 20 managers (in crypto) … 19 out of 20 are not worth running money,” Solarz said. “Many of them are young and have never managed the money. They will say ‘we are investing in Bitcoin, Ether and Solana.’ And I would say, ‘Well, why am I paying you 20% for that?’ … When I pay 20% to a manager, I don’t want to give them things that I can just do my own or buy in an ETF form.
The crypto sector is likely to continue to present opportunities asymmetric to currency managers until the technology is fully integrated into the financial sector, according to Solarz. No one said they were working for DOT-COM companies, as every firm was a DOT-COM company. At some point, people will stop talking about crypto as something separate from the remaining financial system, so reasoning goes – perhaps when bitcoin gets gold in terms of market capitalization, which Solarz thinks can happen within the next 10 years.
There is no Altcoin period
There are three large categories of funds Solarz looks at for allocation: Adventure funds (which provide capital on startups), liquid directions (funds that bet if the market is climbing or down) and liquid neutral market (which earns to earn money regardless of market movements).
When looking at the funds in the liquid direction, Solarz is more interested in the process and management of the manager’s risk than the specific theses they can marry. What is their investment strategy? Is it repeating? How do they think about macroeconomics? He then plows performance data points on models to determine how much the manager is adding.
“It’s easy for me to avoid big losses. It’s always hard to choose winners,” Solarz said. “If something seems incredible -believing or I think they have a real investment process, it’s easy to pass, but there’s always a little luck involved as well as the best performer every single year.”
That process needs to be strict, as the days in which all the cryptocurrencies are rising together – the capable times of Altcoin – are done, or he said. The crypto ecosystem now counts over 40 million tokens, by Solarz’s number, and he expects 99.99% of them to eventually go to zero. “There are only 100 worth talking about,” he said.
The crypto market will need an injection of at least $ 300 billion to maintain current prices over the next three years, Solarz argued, due to massive token unlocks that are set to weigh the top 100 tokens. The size of the liquid token market for fence funds is around $ 30 billion, Solarz said, and retail traders moved to Memecoins. In other words, at present no one has bought all that supplies.
“This is the overhang. This is why it cannot be an Altcoin Bull market in general for a few hours,” he said.
Neutral market techniques
Historically, five times more money has come to Crypto VC funds than all of the liquid crypto funds combined, Solarz said, because investment in adventure makes it easier to hide mark-to-market losses from investment committees. This dynamic is one of the reasons why Amiitis sees many opportunities on the liquid part. Solarz has allocated capital to 14 funds to this day. Of these, three are VCs, four liquid directions, and seven neutral fluids in the market.
“It’s a little glib, maybe, but at the institutional level, they try not to lose money, while at the family office, we’re trying to compound returns,” Solarz said. “If there is an opportunity in Venture Capital that seems incredible -Believe … I will consider investment, but the rate of obstruction is higher if you have been locking money for 10 years.”
Neutral market techniques are very useful -useful, Solarz said. For example, merchants were able to hold the price of cryptocurrencies in South Korean exchanges in December when President Yoon Suk Yeol declared Martial Law, creating a crisis in the region. South Korean investors sell their property in a panic, but the residue in the world is not, creating differences -the price varies that the funds can take advantage of.
Another popular approach involves benefit from funding rates associated with eternal contracts. Institution investors often short a cryptocurrency while gaining exposure to the area at the same time; They are allowed to remain a perfect market neutral as they collect interest in perps, which can sometimes reach 30% annual. The same approach was deployed to the spot bitcoin exchange-traded funds (ETF) and the CME group bitcoin futures.
“That’s what they do in this category, they make variations about it, and it’s very useful, double digit return and in a consistent way,” Solarz said.
