There has never been a better time to assign money to cryptographic coverage funds.
That is according to Chris Solarz, director of Investment of Digital Assets in Capital, a company that directs a fund of cryptographic funds, which means a fund that specializes in assigning capital to several money administrators.
“This is the Golden Age for the investment of cryptographic coverage funds,” said Solarz, who used to be responsible for almost $ 8 billion in assignments at the Cliffwater investor firm, in an interview with Coindeesk. “It is an alignment of the stars. This beta version, this secular tail wind … Blockchain as a whole has so much potential. At the same time, the money administrator universe is so scarce that I feel that I am shooting fish in a barrel that can choose the winners.”
Cryptographic markets remain so new that money administrators can administer the same commercial strategies that used to do 35 years ago in tradfi, when the coverage funds were only emerging, said Solarz.
There were only 127 coverage funds in 1990, administering approximately $ 39 billion; By 2024, those numbers had shot more than 10,000 funds that administer $ 5 billion in assets. In other words, the sector became much more competitive, and became much harder to overcome the market.
Solarz’s thesis is that the cryptographic sector (which has approximately 1,650 coverage funds that administer $ 88 billion in assets) is currently 10 times less competitive than traditional markets, to the point that money administrators can dust off and read 20 -year strategies that stopped working in tradfi more than a decade before commercialization.
“I know 20 managers [in crypto]… 19 of 20 do not deserve to be running money, “said Solarz.” Many of them are young and have never handled money before. They will say ‘we are investing in Bitcoin, Ether and Solana’. And I will say: ‘Well, why am I paying you 20% for that?’ … when I pay 20% to a manager, I don’t want them to give me things I can do or buy in the form of ETF. “
It is likely that the cryptographic sector will continue to present asymmetric opportunities to money administrators until technology is fully integrated in the financial sector, according to Solarz. Nobody says they already work for the points of the COM points, because each company is a coma points company. At some point, people will stop talking about cryptography as something separate from the rest of the financial system, so reasoning is, possibly when Bitcoin is reached to gold in terms of market capitalization, which Solarz believes that it could happen in the next 10 years.
There is no Altcoin season
There are three large categories of funds that Solarz seeks allocation: risk funds (which provide capital to new companies), directional liquids (funds that bet if the market will rise or lower) and the neutral liquid market (which earns to earn money regardless of market movements).
When observing liquid directional funds, Solarz is more interested in the manager and risk management process than the specific theses they can defend. What is your investment strategy? Is it repeatable? How do you think about macroeconomics? Then regret the performance dots in models that determine how much value the administrator is adding.
“It is easy for me to avoid the big losers. It is always difficult to choose the winners,” said Solarz. “If something seems suspicious or I don’t think they have a real investment process, it is easy to transmit, but there is always a little luck involved to be the best artist every year.”
This process must be rigorous, because the days when all cryptocurrencies join together, the legendal seasons of Altcoin, have ended, or so says. The cryptographic ecosystem now counts approximately 40 million tokens, according to Solarz’s count, and hopes that 99.99% of them will eventually reach zero. “It’s just worth talking,” he said.
The encryption market will need an injection of at least $ 300 billion to keep current prices in the next three years, argues solarz, due to the unlocking massive tokens that are scheduled to weigh the 100 main tokens. The size of the liquid tokes market for coverage funds is around $ 30 billion, Solarz said, and retail merchants have passed to Memecoins. In other words, there is currently no one to buy all that supply.
“This is the cantilever. That is why there cannot be an Altcoin upward market in general for some time,” he said.
Neutral market strategies
Historically, five times more money have become cryptographic VC funds that in all combined cryptographic fluid funds, said Solarz, because the risk investment facilitates the concealment of marking losses for the investment committees market. This dynamic is one of the reasons why amitis sees more opportunities on the liquid side. Solarz has assigned capital to 14 funds so far. Of these, three are VC, four are liquid addresses and seven are from the neutral liquid market.
“This is a bit simple, perhaps, but at the institutional level, they are really trying not to lose money, while in the family office, we are trying to aggravate returns,” said Solarz. “If there is a risk capital opportunity that seems incredible … I will consider investing, but the obstacle rate is much higher if it is enclosing money for 10 years.”
The neutral market strategies are still very profitable, said Solarz. For example, merchants were able to arbitrate the price of cryptocurrencies in South Korean exchanges in December when President Yoon Suk Yeol declared martial law, creating a regional crisis. South Korean investors sold their panic assets, but the rest of the world did not, creating disparities in the price that the funds could take advantage of.
Another popular strategy implies benefiting from financing rates associated with perpetual contracts. Institutional investors often cut a cryptocurrency while obtaining exposure to the point at the same time; This allows them to remain perfectly neutral in the market while collecting interest in the PERSES, which can sometimes reach 30% annualized. That same strategy is implemented in the funds quoted in the stock market (ETF) Spot Bitcoin and the futures of the CME Bitcoin group.
“That is what they are doing in this category, they are making variations about this, and it is still very profitable, two -digit returns and consistently,” said Solarz.
