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How Digital Asset Funds Work During the COVID 19 Crisis

May 16, 2020

The first thing to consider is that despite the characterization of the safe haven of the cryptocurrency, the asset class itself in March it seemed to correlate closely with traditional public markets. In addition, there were some notable crypto funds that went bankrupt due to uncovered positions, leverage adjustments, or difficulties in performing proper risk management. As in December 2017, some funds were so far below their high mark that the fund managers decided to liquidate them, carry out mandatory bailouts and discontinue activities.

On average, Crypto hedge funds (hedge funds) were down among our customers, but not as much as their traditional counterparts. Neither category fell as much as their respective benchmarks on the market.

Not surprisingly, we can identify two groups

Funds with market exposure (e.g. long-term funds) were largely reflected in the market – although we have seen exceptions – during Market-neutral crypto hedge funds implemented mainly with better consistency.

How Digital Asset Funds Work During the COVID 19 Crisis
How Digital Asset Funds Work During the COVID 19 Crisis

The most stable funds are usually systematicusing a combination of market neutral strategies such as statistical arbitrage and a return between 1% and 2% per month in all conditions. Some of our customers have stuck to these numbers despite the corona virus crisis, and with the increasing possibility of volatility, some of them even exceed and present an alpha indicator.

It is worth noting that, unfortunately Some of these market neutral funds have suffered from “poor execution” by their broker / exchangewhich did not allow them to perform as they should. Overall, funds in this category have significantly minimized losses compared to funds exposed on the market.

On this subject it should be noted that in general The entire industry was very crisis-resistant: We have not seen socialized losses in any major exchange, and very few have decoupled. Thanks to the digital nature of the crypto space, the industry copes very well with minimal disruptions in the new world where you work “from home”.

Just like in traditional public markets, Industry believes that market-neutral hedge funds will gain momentum as investors try to reduce their risk of market uncertainty.

This factor, in addition to current market volatility, could explain why Vauban has never received so many requests to launch new high-risk mutual funds, and a good percentage comes from crypto fund managers. We hope that hedge funds will flourish in the coming years and that there is an appetite from investors for these funds.

Crypto hedge funds remain a fantastic opportunity for investors. While there are inherent risks to the industry in their current state that need to be considered, market neutral funds that fall within their scope offer a good opportunity for consistent long-term performance that would be very difficult to achieve in the industry traditional markets. On the other hand, Some directional funds are expected to deliver significant benefits to their investors in the short term.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.

Rémy Astié He is the CEO of Vauban, a financial technology company specializing in the smooth establishment and management of mutual funds. You are welcome to write about fund structures for digital assets.

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