Volatility, neutral exposure and market making can still pay - at least for crypto hedge funds.
Despite the fact that cryptos have collapsed across the board so far in 2018, one investing axiom still holds true to this day: the house always wins. Those who have been making a market, keeping neutral net exposure and benefiting from exotic methods of trading cryptocurrencies have continued to have a positive year this year despite the fact that a lot of the underlying cryptocurrency assets have had a terrible year.
Bloomberg reported on Thursday:
Funds specializing in virtual currency market making and arbitrage strategies delivered first-quarter gains even as their mostly bullish peers lost 40 percent on average. That’s a big reversal from last year, when digital assets soared and market-making funds lagged far behind their long-biased counterparts.
Pivot Digital Trading-2, managed by Hong Kong-based Amber AI Group, generated some of the biggest gains among cryptocurrency funds that avoid directional bets. It rose 4.3 percent in March to bring its first-quarter return to 30 percent, according to the firm. Market Neutral Liquidity SP-Institutional, domiciled in the Cayman Islands, earned 5.6 percent in the first quarter, said Cedric Jeanson of BitSpread Group, investment adviser to the portfolio.
The man behind the curtain continues to get his take. The increased volume that comes with crypto's plunge may not be great for traditional “buy-and-hold“ crypto funds or retail investors who only have the means to hold long, but that did not stop market makers, net neutral funds and volatility bettors from cashing in. The article continued:
The results suggest some managers are finding ways to profit from wild swings in cryptocurrencies without having to predict whether they will rise or fall. Such tactics may appeal to investors who want exposure to cryptocurrencies without their extreme volatility.