Trading in Arbitrage Hedge Fund Avoids the Bears in Crypto | Paragon Alpha

Trading in arbitrage Hedge Fund avoids the bears in crypto

By Matea Gucec

Not all funds dependent on cryptocurrency assets are down this year, but the majority are. In fact, a hedge fund that uses arbitrage trading had a successful year in 2022.

The 2022 crypto contagions have increased pressure on already low asset and fund values. One business, meanwhile, seems to have defied the trend with its cryptocurrency hedge funds.

Two funds managed by Pythagoras Investment Management have seen profits in a year whereas the majority of other funds have seen losses.

Market Neutral Fund and Pythagoras Token Fund of the company have risen about 8%

The performance of the Market Neutral Fund is unaffected by the price of digital assets. Furthermore, since the start of this year, crypto markets have fallen 61.5%.

The fund buys identical tokens in many locations at various rates through arbitrage trading. By purchasing low and selling high, it can benefit from the difference in those prices for the same item.

According to Pythagoras CEO Mitchell Dong, the fund performs better in downturns.

The other fund has been shorting the cryptocurrency market this year and uses trend indicators.

Additionally, Pythagoras has benefited from the aftermath of FTX. Before the crisis, its arbitrage fund had a 10% exposure to the exchange. The business has gotten back around 7% of its money, which it utilized to short FTT, the native token of the exchange.

Dong continued by saying that the funds depend on the mindset of small-time traders,

Dong claims that Pythagoras, which was founded in 2014, seeks smaller, more consistent returns from the asset class. "I need consistent monthly returns of 1% to 2%, with no losing months.

This year, along with its underlying asset, Grayscale's GBTC, the biggest cryptocurrency fund in the world, has collapsed.

Since the start of 2022, GBTC has dropped 74% and is now trading at $8.98 a share. Additionally, according to Ycharts, the Grayscale premium is at a historic low of -42.34%. The fund's premium—or discount, in this case—relative to BTC prices serves as the gauge.


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