The co-founder of hedge fund says he’s keeping his investing powder dry in case the crypto market resumes its meteoric rise.
Following the crypto market crash in May, crypto hedge fund Nickel Digital Asset Management switched to a cash position.
According to Bloomberg, a $200 million crypto hedge fund founded by JPMorgan and Goldman Sachs graduates has redeployed its funds in anticipation of another cryptocurrency price surge.
Nickel Digital concentrated on cryptocurrency arbitrage opportunities arising from price gaps in the spot and futures markets before accumulating into a cash position.
Moreover, institutional investors with enough capital to profit from these brief price differences were said to be able to earn double-digit yearly gains through crypto arbitrage trading. Because the focus is on price differences rather than price action, these trades are neutral rather than directional.
Nickel Digital CEO Anatoly Crachilov informed Bloomberg about the fund’s investing concept stating: “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 is said to have made a 29 percent gain at a 3 percent volatility, which is significantly less than the 78 percent market average for crypto assets.
Nevertheless, hedge firms like Nickel Digital claim that Bitcoin’s (BTC) blow-off high in April and the accompanying altcoin capitulation in May have upended these arbitrage chances.
Bitcoin’s 50% drop from its all-time high of $64,000 caused a $9 billion cascade of liquidations in the futures market, primarily for over-leveraged longs. Altcoins have also plummeted by more than 70%, and price action has continued in a sideways accumulation phase, with periodic falls of 10 to 15%.
For the time being, Crachilov is content to wait: “June will be remembered as a cash-rich, wait-and-see month.” The CEO of Nickel Digital also remarked that the present market dip is nothing out of the ordinary for crypto investors.
Institutional investors are starting to consider crypto investments as a reputational risk, according to the crypto hedge fund CEO. Indeed, banks in the United States and Europe are starting to offer direct Bitcoin exposure to both retail and institutional investors.
Alex Mashinsky, the CEO of crypto financing platform Celsius, told Cointelegraph in June that he believes Bitcoin will reach a new all-time high of $160,000 before the year is over.
