The State of Crypto Funds

Transcript

perfect hello everyone we're very happy to start this webinar today with our special guest Richard Borth um who I know now for a few months or even a year um and a very knowledgeable person in the crypto space since many year and I'm also very happy that I have with me my co-host um deil sah and um so maybe um I would just like to jump right in the center of our discussion Richard tell us since how long you are in crypto and

what did you do in the last few years so uh thanks Mar for the kind introduction nice to be here with you and deza um so yeah I got into crypto uh really in 2017 um it was after a long journey of um exploration around uh hard money substitutes um I'd been in traditional finance and I had become very concerned with the financial system I'd been buying gold from about 2009 and uh I'd actually dismissed Bitcoin first in 200 night when a young

kid on my desk uh told me about it and said I should look at it and I said what is it and he said it's is a currency on the internet and I said well it's probably a scam you should leave it alone and uh that was my first dismissal very expensive dismissal of Bitcoin um in 2017 I ended up reading the book sapiens uh where I agreed with a lot of hariri's ideas around the way the world was going and the changes we were likely to see um and he kept mentioning Bitcoin and blockchain and I was like I don't understand why this guy who's clearly credible sensible guys is talking about this scam on the incident so at that

point I decided I needed to do a bit more work and I started just tinkering around with it buying it h read the white paper and realized there was something a lot more to this than just being a scam on the incident so so that sort of fueled my journey into the industry I invested in a cryptocurrency mining company that I later joined and they were looking at expanding into Financial Services which is why I joined them and we went on a journey there building an exchange custody the uh provider we actually built a fund of crypto hedge funds all the way back in 2018 we started building that um launched it in 2019 and then when I

joined se's capital in 2022 uh started the process to build a product that looked a lot like it but was improved in many different facets so that's a very short version of The Journey yeah um maybe I as I told you we know was I think since the very beginning you came here to Switzerland you do you're here now in Switzerland explain us what you're doing here now why you are here sure so I was actually in Switzerland sort of taking some time off after the uh crypto company and uh I was having a good time with my family

reconnecting and uh stuff I'd been in Hong Kong before my kids lived in Switzerland and so I came back and was was hanging around here and actually in March I got contacted by Mark C's so Mark C's of the C family CES bank and Mark asked me if I consider joining him to run his uh the hedge fund business of C Capital so C capital is the alternative investment armor of the entire C's group we look at look after hedge funds private Equity um legal assets so litigation financing goone lending and I said yes that's definitely interesting but one of the products we

definitely would need to build would be a fund of crypto hedge funds because the alpha that exists in crypto is is quite remarkable and so Mark was already someone that had a good understanding of crypto and good understanding hedge funds the bank has a 28 year history of hedge fund selection and so he said that sounds great we should definitely build that product and uh so then I joined in October and I think I met you in October in zoo which was actually my first time ever in zoo someone had said are you gonna meet Martin um he's a key guy at crypto Valley you'll get on well so that was uh

that was how we ended up meeting in Zog and then uh you told me what a great place it was so I ended up moving here perfect great good to hear yeah now maybe we we as as we have the title of our new or of of this webinar which is called the current state of crypto I think we're now at the very interesting moment of crypto of course I mean we all have seen rather difficult times I would say the last two years uh with a with with a difficult crypto winter but still now I mean the recent developments and all the

last few months I mean Bitcoin still is now quite stable above his lows from end of last year especially now this week was uh very much um in I mean strong price signals and strong hike in in interest so maybe just as a general what's General view on on on what happened the last few months and weeks uh uh how do you comment yeah I think what we're now seeing in the price behavior of Bitcoin is something that's really a paradigm shift um you've now seen

Bitcoin completely decorrelate from the equity markets from the bond markets and is acting much more like a flight to safety asset and I think this has been a very key criticism of bit Bitcoin from the traditional institutional investment Community has been that oh Bitcoin just trades like a risk asset it trades like NASDAQ it trades like Tesa whatever it might be um you know it's just another risk on asset and it's obviously always hard to push back on an argument like that when you've seen two to three years of that exact Behavior and the the point I always make to these typ Ty of

investors is yes because that is now at the point of being adopted and traded by macro funds by CTA funds that are looking at it as a risk on asset and so when you've got the majority of the capital that's trading that asset trading it as if it's a risk asset then of course it's GNA trade like a risk asset what's very interesting now as I said is it's broken that correlation and you're seeing it as very much reflects safety and this is something that you've had a lot of bitcoiners talking about for a long time myself included is that you know your Bitcoin is your hedge against the failure of the financial

system and so when you're seeing the bond markets under this level of stress and you see Bitcoin have a rip of 15% to the upside then suddenly people across the world are paying attention because is this is not doing what anyone's expecting it to do uh in the broad institutional base and so we're probably moving into a different phase of bitcoin's life and bitcoin's maturity and development maybe I want to ask two more question and then I would like to hand over also to to to the males I mean you are you are with seeds Capital now you started in July if I remember when well

um with different products I mean with a funds right I mean one fun or fun the funds basically which you're doing with one is Market neutral the other one isn't um uh I think you're very if I remember well you're very analy strong in the analytics you do lots of onchain analytics could you maybe share a bit what you see in the last few months I mean because we have some signals like you know many now even bitco even now is price hike some were liquidating positions I mean on the other hand I mean they have to be more buyers than sellers otherwise we wouldn't have a

price hike maybe also how do you see you know with the whales or non whales how what what what do you see and what what can you share with us sure so just to correct a couple of things um sorry just clarify I joined C capital A year ago uh we launched of crypto hedge fund product on the 1 of July it is one product um the base of the product is Market neutral so the idea is that this provides positive returns in any environment that is what we we seek to do and in fact many crypto investors invest in this product as as a cash

proxy which for an Institutional Investor is a bit of a a ridiculous uh way to think about it but because it is such a stable low Vol product um that is kind of the the the return profile that crypto investors see so we target 25% Ira on an average through the cycle basis so in a bare Market we're looking to get around 10 to 15% and then in bull market we're looking at nor of 35% and that's played out out obviously I ran a fund very similar to this previously that's played out through previous cycles and that is exactly what we've seen with the

portfolio funds that we put together today so just to explain that just to clarify the way that we construct portfolio so yes to your point we do leverage uh one specific part of alpha uh that is particular to crypto and that is that massive data set that is all the transactions that have ever gone through through on every layer one blockchain so as everyone listening to this call uh knows I assume uh every single transaction and the wallet originating it wallet receiving it is recorded for eternity in the base layer of the particular blockchain that it's transacted on that provides a massive

data set for us to be able to analyze and see what is going on and to your point yes there has been we actually call this the reaccumulation phase so we passed into the reaccumulation phase in March that's when you start to see a few indicators like for example um Wales you mentioned Wales or wallets that are generally selling the top of the market and then buying back at the bottom of the market um they have been in accumulation since about March now and so this is very typical get this sort of flat chop along uh and to the point where you obviously you're moving into the Haring cycle as

well so the market is normally quite stable if you look back to the previous period we were stuck at 10,000 uh for for March of 2018 and 19 um and so on an average basis you kind of at 10,000 for us this cycle our average basis is around 30,000 and so we've been kind of chopping around that and now we with what we're seeing on chain we expect that um we will be moving into the bll cycle fairly soon obviously the harving is coming in April that's often a driver of the bull cycle because you know the Market's got used to taking out that daily supply of today it's 900 Bitcoin

for an equivalent amount of dollars in to the 30,000 level and then obviously that Supply hars but the same amount of dollars are coming in on the dollar cost averaging um daily buying and so you get generally a jerk reaction not immediately normally it's a bit post as all remaining Supply gets eaten up then uh and then you generally move into the bull cycle few months after the harving um we actually think that we'll see bull cyle start a little bit early this time um largely because you know people have seen it happen three times um they probably will not wait um and probably

start to front run the Haring um you're seeing the hash rate um of mining go to alltime highs um we are at ridiculous levels in terms of ether has um for Mining and so anyone that's not mining with very cheap electricity and very upto-date equip equipment is getting priced out of the market now and it seems to be uh thanks to a lag of delivery times of the new equipment that have been coming um the order lag time is normally one to two years for some of this you know very high end s9s um so that is has pushed the hash

rate um and as I say normally you know you see a follow of the price to the hash rate so that is also um implying that we will see the bull market come earlier than we normally do in the in the general cycle one more thing to to mention about onchain um you know allocating to hedge funds and being able to produce a 25% irr is fantastic but the problem is you do have risks and FTX in 2022 November showed us the risk that you can have by having hedge fund portfolio the majority of hedge funds had exposure

to FTX and so they ended up with balances lost on FTX and so one of the things that we built um actually for approval from the C group board to allow us to move ahead with this product was an hourly monitoring system of all the underlying exchanges wallets for the key layer one blockchain we monitor Bitcoin we monitor eth we Monitor usdc and usdt of all the key exchanges on an hourly basis um and then we inform our manager if we see any major changes we did actually um just to tell you a story on

that one two days after launching our fund we actually got our first major red flag which was Hobe the Chinese exchange um their Bitcoin balances dropped by 50% over 24 hour period and so we contacted all our managers um this was about 400 a.m. us time and of course the one manager with exposure was based in the US um but by 7:30 A.M he managed to get his balances off Roby um we found out five weeks later in the news that um Roby had had some issues with the Chinese police and the Chinese police have been

questioning uh employees which had been clearly leading to panic and people withdrawing their balances and if you weren't in the know then you didn't know what was going on um but the market found out five weeks later and we had obviously alerted our managers uh the minute we saw it on chain so it does give us a nice Edge we feel in constructing a portfolio yeah maybe just to our admin I don't know I've just received the message here that apparently people are having troubles in getting into the our event here oh de did we do you hear some do

you see um the one the zoom link I received Christina Adams told me that the zoom link she received is invalid but I don't know okay I will check our info email but we have people coming in so the link is okay good good good perfect if it's if it's I just wanted to make sure that we're not just the three of us discussing here to very interesting stuff [Laughter] great good at the MAA maybe I would like to hand over to you sure well thanks a lot Richard for joining us today um and and thank you for the introduction and

and kind of uh bring us up to speed with what you're working on with c's capital so I had a question um I as you um I don't know if you mentioned on this podcast or on the podcast you did with relay and julen but you mentioned that uh this new fund of funds was in collaboration with willly woo so I'm just curious um yeah like H how how do you guys select what funds to invest in and also when I read the press release about the the fond of funds I I think it mentioned that it was it was crypto investing in crypto in general and not only Bitcoin um so are you investing in in funds that are are are

are like open in terms of what you know the underlying universe or only Bitcoin strategies uh great question yeah know look Willie and I are are bitcoiners obviously and uh but uh the opportunity with crypto is that there's a huge amount of alpha the alpha comes from volatility it comes from actually the very high volume at periods of distress when exchanges are going down and spreads get really wide um it comes from the fragmentation of the liquidity pool um you know there's 30 uh viable exchanges I would say where you can actually trade proper volume you know if you think back to the

hedge fund days of the 80s and 990s you know the the the early Arbitrage hedge funds were trading acoss across two or three exchanges here you've got 30 exchanges um so it presents a huge amount of opportunity um I would say on the alpha side and look Willie you know I'm sure many people uh here know who Willie is Will's a data gun so you know Willie is absolutely obsessed with you know looking at the different data sets on chain but also within the performance of managers as well um to try and you know construct optimal portfolios you know we came together with this partnership

because Willie and the team at cmcc were very keen to create something that they were they refer to as the freedom fund I.E money where they can just park and know that it will just gently keep the greeting higher um because obviously all their exposure is in Bitcoin and crypto um we came from ad a different approach and actually even before I joined the hedge fund team were looking at crypto because in the traditional hedge fund business is always hard and you're always looking for new sources of Alpha and so the returns that were being made crypto meant that that was becoming more

and more interesting for a hedge fund Advocate and so it was really just a a meeting of the two needs you know we had the need to be able to read that blockchain data Will's obviously one of the pioneers of doing that and they needed someone to help them understand the risk of investing in hedge funds be they crypto or traditional hedge funds um and so it came together uh thanks to um Mark C's who who knew both parties and uh got us all connected and so we started working on the project literally as soon as I walked in the door um so it was it was perfect because when I when I

spoke to Mark about it he goes I know just the guys we need to speak to and that's how we ended up working with Willie W but uh yes crypto you know many of the PE it's very interesting many of the fund managers that we invest in they've moved from traditional Finance because they've been attracted by the really elevated Alpha that you have in crypto that you really don't see so much of in the traditional markets and so you know you may have a purist thought about Bitcoin um as we do um but there is a huge amount of wealth available in the trading strategies around this entire asset F so yeah I think that's the same

answer I get to Julian really yeah yeah yeah it's interesting no that's great um I was just curious how also in the interview with Julian you said that you are a Bitcoin Maxi yourself and then you mentioned that here so how did you come to to that um Outlook as opposed to kind of somebody that also is interested in ethereum or you know you staple coins or nfts or some other securitized uh stocks or something else on the blockchain so I'm I would say I would caveat it and that was something that uh we discussed with Julian is that I'm not a toxic Bitcoin maximist in that I'm not going

to scream people for trying to invest in other cryptos um I'd say there is the potential that other crypto will produce um all sorts of interesting things and I think nfcs can be very interesting for things like you know documentation home Deeds these sorts of things your University certificates which I always have to try and apply for every time that I'm you know joining something that I need to get hold of those payment uh documents I need to go and reapo my University it's a complete pain if I haven't been in nft it would be super convenient of course so I think there are a number of implementations of crypto that can be useful the reason

that I describe myself as Bitcoin Maxi is because when someone ask me what crypto should I be investing in I will say Bitcoin and don't do anything else if they insist on doing something else I will say listen you are at a massive information informational disadvantage to the crypto VCS that that operate in this space you are the exit liquidity if you end up trying to play that game so either you really need to know the project inside out or if you have to touch crypto then invest in it via Crypt BC pay them the 2 and 20 is worth the money they will do very well in the bull

market they get to invest in salana cents on the dollars and and you know they're they're selling it out into the for all of the ball Market but you know often what happens is people come with a sort of oh I've seen crypto it's going up what crypto should I invest in I'm Bitcoin own really it it has to be Bitcoin only Bitcoin from my perspective is the only asset within this asset class that has proved itself that has proved utility that is used all across the world um and you know as we discussed earlier it's proving to be a flight to safety asset in the problems that we're now witnessing in the banking sector in

the bond market um I wouldn't like to be an equity invested right now that sounds scary as hell um so you know Bitcoin you know it makes a lot of sense does other crypto make a lot of sense yes but really for me you're then investing in VC high octane VC because sure some of these projects will do really well but some of them are just going to do lose all the money and the thing I get concerned about for ethereum particular because everyone looks at ethereum and says oh well ethereum you know is also a very blue chip asset in crypto well ethereum is losing market share on the stable coice is losing market share on pretty much every other new protocol that's coming if you think about gaming

salana has taken so much of his market share that you know I think that the change that we saw with the move to proof of stake I don't think it was a very sensible move um I think that constantly tweaking the base lay protocol is problematic if people want to be building on it and making such a big change when I think there's a lot of value to proof of work and you know we can talk about that as a whole different subject but moving from proof of Works proof of States just makes ethereum from a monetary perspective um a little bit like the Fiat system that we're dealing with where the biggest controllers of

the money get to make the decisions on the protocol which I don't think anyone came here for that's not why we're in cryp right so I think for me I I'm very concerned about how much value potentially ethereum can lose um because it's up against a whole load of potentially very promising protols that are you know you look Tron you know I'm not saying Tron is any kind of good asset or protocol but Tron Tron based tether is the main tether that is required all across the developing world because it has lower fees than ethereum so now the majority of tether I believe is now on actually on Trump um and

that's a huge asset base so you know 80 billion I think last time I checked on t so you know ethereum slowly losing market share in these Pockets I think it's got a long ways to P I'd be concerned wow that's that's fascinating uh point of view you have there yeah I mean I I work at qu Telegraph um and I also manage a small Fund in Zurich and um you mentioned haabi earlier and haabi I don't know is it I don't know if it's public or not but haabi is is owned by Tron like Justin son it's the same group of people and so we we we do different things with both of them at coin

Telegraph because they're always doing marketing and everything but um like you said with the the scare with the police like I got out of Tron because of the scare around Justin Sun uh when he got arrested I think like earlier in March of this year or something but I but but Tron did have a good year um you know and like you said the the US usdt on Tron is is the largest one so I know I've I'm a big fan of ethereum but you're right there are a lot of red flags popping up um more more so now since it's switched to to proof of stake well yeah that's great so um thanks a lot for your feedback on that when when you mentioned the bond market breaking um I was curious like what what do you

think's going to break first before the the central banks kind of decide we need to Pivot H yeah it's a great question um what unemployment does jome pal need to see how bad does the B bond market need to be um yeah I don't know if you've been following the last 48 hours but XI jingping made a historical visit to the pboc um and also uh to cic as in the The Sovereign weal fund um the implication is that he is now doing everything to support the Chinese economy from a

financial perspective and you've seen very clear national team buying um in into the market so spiky very spiky Futures Market into the open Chinese markets so um there is obviously a lot of back channeling with China and the US and I believe that China as much as the politicians that are trying to get elected are going to be trying to force the FED to Pivot as soon as possible um but yeah I mean how for his credibility perspective is trying to hold out as long as he can um but uh yeah I mean we're we're starting to see things break

then is concerned definitely yeah um I I've heard some some bitcoiners say that because of the the 8% interest rates in the US basically um on mortgages and 8% on on various like bank loans for consumers and stuff that they think that the new Bull Run is going to be a bit subdued because of how high interest rates are around the world um but on the other hand like you said there's so many signals like all-time high hash rate um this is the third time so maybe Traders will start to price it in early um so where do you think we're going to be at like by the end of this year uh like if

you any any thoughts on the on the way it's going uh look it it could be anywh um we know um to try and make a TW month prediction is very very hard um but I think you know I I overstated my prediction for the previous bull market and so I I tried to not make predictions for the market uh this anymore but what I will say is and I said this to because what day was it when everything rallied like crazy I think it was Sunday so Monday morning obviously phone's ringing everybody's

calling oh should I buy Bitcoin do you think bitcoin's still an interesting trade blah blah blah and uh I uh I I I said to everybody that called me I said listen Bitcoin under 200,000 is a massive discount so that that's just where it is that's just how I feel about it I think that if you look at any metric that puts it at about 40% of Gold's Market count at 200,000 I would say as many people do that the digital version of gold is like you know Bitcoin is gold and Fiat combined I it takes the superpowers of both combines them into one the key problem the golden reason

that it failed is a as a secure as a you know you know uh the final hard money was because of the portability problem right you ended up having to store all that gold in a safe place and so it it came under the purview of you know Fort kns and and others and therefore it got centralized we end up with the Fiat regime and Fiat is obviously electronic so it's ultimately portable but now Bitcoin combines both those attributes with ultimate scarcity so I think that a 40% valuation of gold is probably um a fairly conservative view of where Bitcoin should be at this point in time

and yeah you asked the question about interest rates do do you really care at that point about where interest rates are when you've got this asset that is completely unique we've got what is it 19.5 million of the 21 million have already been issued they're already being held and I think 74% of them have not moved in over a year so you have a supply and when the Haring comes you're gonna get that knee-jerk reaction once again um you mentioned Rel I speak to their OTC Des fairly regularly to just get an idea of how much blow they're taking and when you combine them and

Swan and coin bases program and all the dcas and we kind of we we try and monitor how much it seems to be consistent buying a Bitcoin on chain because someone like relay goes to their own wallet directly which is fantastic so you can sort of see all those dollar cost averaging wallets and so you can create clusters around there we estimate that about 28,000 Bitcoin a month are bought through DCA platforms which means that's the entire supply of Bitcoin is being bought every month by DCA um and then you can buy in tether tether's buying we estimate about 30 Bitcoin per day with their profits

Michael sailor's buying about three Bitcoin a day with his profits and El Salvador is buying one Bitcoin a day those are the only institutions and sovereigns we know about so you combine that with these daily stackers and you know a lot of people are starting to wake up this is a truly finite asset uh ultimately scarce commodity um that is you know there's only 1.5 million left to be issued and as I'm sure you know deza that takes another 117 years so we are gonna be fighting over that remaining uh issurance I know what a good point I

mean listening to you makes me want to go out and buy Bitcoin right away finish finish this call and go buy Bitcoin um but but I I agree I as a young person I mean I I'm not that young anymore but I I I'm not much into buying gold I mean I I used to buy gold um when when I was before I knew a lot about Bitcoin and when I was interested in Austin economics but ever since I found out about Bitcoin I just buy Bitcoin instead of gold so so people like me are are definitely you know Bitcoin is taking Gold's lunch away from I think a lot of young investors that could DCA into gold or Bitcoin I think they're they're choosing Bitcoin um but yeah um Martin did you have some more thoughts for

Richard no I think it's very interesting to listen to your to your um to your discussion and um I mean maybe I mean what I what I what I was wondering and what I what I wanted to discuss also also a question regarding Bitcoin I mean what will happen now with the halfing you know let's say we are we have now as as far as I know know we have quite many miners which are under stress now which I mean they don't really earn a lot with the current bitcoin price and the energy price and and and the supply you told us before the uh the equipment you

need what what will happen if maybe there are too many miners which you know go out of business and we have just a very very few ones what do you see here Richard well look it's a an ultimately self um self cleansing market right only the fittest survive and unless youve got the cheapest access to electricity unless you've got the best equipment it is going to be very hard for you coming into the harving unless we see a price po so you know you get that natural selection every every harving uh we see it massive amount of miners going out of business post the bull run so the Bull

Run happens and then you get often a very big pullback I'm not convinced that we'll see the same level of pullback this time but I'm also not convinced that we'll see the same level of rally sort of we're maturing into this so you're likely to get less pronounced um rallies and uh pullbacks um but yeah I we we see it every cycle Martin it's it's very violent um normally um I would suggest that the violence will become less um many of these big miners are very well funded now um they're publicly listed companies they've got good War chests um and uh yeah they're they're um obviously very efficient in their

negotiation of electricity you know we talk about the benefits of proof of work um one of the benefits of mining is that it can create grid stability for you know someone with very volatile requirements of electricity like the state of Texas you know they have extremely hot summers they you know they do have storms that knock out um a lot of their electrical capacity often and so they have this very varied requirement and an increasing need of the Peaks to have a huge electrical grid but to build that out without the demand for 80% of the year is impossible so

mining is allowing is a continual user of electricity absolutely drop off the grid and I think you know this is this is very good for energy um abundance in the world broadly um and you know this has other implications right you can say okay let's say I want to do a debt issuance and I'm a country with a debt problem but I have huge abundant resources let's take Argentina for for example right Argentina has a huge amount of geothermal huge amount of uh Hydro potential as well and so if they started

raising capital in a debt structure based on infrastructure build then they could probably alleviate themselves from a lot of the um IMF debt that they find themselves choking under um that has led to hyperinflation um of those economies for for many years so I think that that this can be an amazing tool to to help propagate that future and Bitcoin mining is extremely Central to that because you know they can pay for the infrastructure they can use Bitcoin mining to take the energy while they don't necessarily have full need for it um and monetize it so that they can pay off that debt um yeah so

that's yeah I think yeah yeah that's that's I I know that this this call is to discuss uh funds and uh and maybe it would be worthwhile just talking about some of the different strategies that we see in funds if if that makes sense absolutely I think I have one more question regarding because Also regarding what you were what you're doing in the fund of fun bases and uh uh and obviously very linked also to you know financial institutions he Capital you our family which is in banking since very long time it's one of

the oldest banks in Switzerland or very old Bank in switzland mostly Generations old and so on so one of course it's already interesting to see them moving into the space and now I want to know also from your side I mean we have now this discussion like with black rock and many um companies trying to to get um Bitcoin ETF on start and um I'm wondering what do you think about this what will happen there and also maybe what's now in the interest what do you see now with your clients you know how is the interest from

institutions is are they coming do you do you see a difference I mean we we talking about the the institutional interest since quite some time but it didn't really it didn't really materialize until now do you see a change I mean with all having probably I mean you you're in discussion about with fundraising maybe you could also elaborate on this yeah sure I mean what what has been interesting is obviously I think we were moving quite well towards institutional adoption until FTX happened and you know a lot of the investors that got caught up in in in FTX you take some of you had Sovereign wealth funds that

were invested with FCX I mean it really not only did it leave them licking their wounds it also left them with a lot of egg on their face um and a lot of embarrassment um so you know it's it's been a credibility punch for the industry I would say that um us coming into the industry has um has been welcomed with open arms in the funds that we're investing in so just to give you an understanding every fund that we invest in we negotiate on liquidity we negotiate on capacity and we negotiate on fees and because as you rightly say

we bring the credibility of a banking group into into the fund they're obviously they're very keen for us to be an investor because you know we say that you can you can publicize that you can mention that we're an investor but you know obviously we want extremely good terms for our investors so that's that's obviously the quid pro quot but to your point I think that the credibility of having institutional investors in the space has been lacking since FTX which is why we've been welcomed with with open arms as I say by these funds but also now us being involved and us going out and raising Capital um has meant

that we're speaking to a number of obviously family offices but also small pensions uh insurers um and more institutional investors are like okay we've been wanting to look at crypto for some time we now have a product that you're bringing uh very low volatility products but get getting us access and understanding and able for us to dip the toe in the water um and so that's that's a a very nice piece of progress that we see firsthand um with our conversations with investors to your question about the ETF um look I think this is the subject that everybody's been talking about in

crypto for what feels like eternity it's like I guess it's only three months but um you know Black Rock getting involved is significant um I was actually quite close with the previous Global head of ETS um they have a I think they've made 672 ETF applications in the history of Black Rock they've had one fail um so a very high hit rate um they clearly know what they're doing they're prepared the SEC is obviously on the back foot post the grayscale loss um and I think yeah we're going to see an approval very very

soon and look there's plenty of ETP products on the market here in Switzerland we've got 21 shares but the thing that everybody misses is when they make that point is that the 401K Market in the US is trillions of dollars and it basically can't invest in anything other than ETFs uh when you know uh so it can't have invest in the etn it can't invest in great scale Etc they have to have an ETF so this is why it's so important uh for this approval obviously I think everybody's got the joke that a Futures ETF is a disaster because the funding of the Futures is rolling and

it's just bleeding into your product it costs you you know the reason we make so much money in the hedge fund Investments is because they're they're trading the other side of these Futures trads right so they're just taking that free money which can be as high as you know in March 2020 we saw that basis blow out to like 80% anys so if you're trading a Futures product to go long Bitcoin you you're getting absolutely destroyed through the fund so a Futures ETF is not fit for purpose that's why a spot ETF is so important and if it opens up that 401k Market you know just minuscule basis point percentage means

billions of dollars of inflows into this Market good maybe now I think you proposed to discuss a bit the strategies you want to apply and maybe I think this would be also interesting to learn something about this yeah look as I said we we see a number of traditional hedge fund managers that have moved moved into crypto because the alpha that exists is so elevated compared to other markets so what you've essentially done with crypto is you built the entire infrastructure of markets all over again right Bitcoin trades on you know 300 exchanges 30 of

which are potentially liquid you've got OTC guys in there you've got custodians we've got dexes uh centralized exchanges so you've got liquidity just all over the place and this leads to multiple avenues for Arbitrage so we think about our portfolio in about four key buckets so we bucket Market neutral with General Arbitrage strategies SO trading the AR on basis of the Futures like I said um mean reversion strategies so you know we like a long short managers that can do me that are focused on mean reversion as opposed to fundamentals we don't want a

long short manager telling us I like ethereum more than I like polka dot so I'm GNA go long ethereum and short polka dot well we all know that crypto is not logical the way that it trades at this point anyway and that is a much more longer term strategy than you're waiting for what we're looking for is mean reversion strategy so historically let's say ethereum has always traded at a you know 25% premium to pokka doll okay it's now blown out to 40% premium okay that's a logical sh by sell ethereum by poked right and Edge into that trade so you're looking at situations in the market that are are sort of multiple standard

deviations events from the normal mean um trajectory of those assets and then trading into that reversion trade so we bucket all of those types of Trades into our Market neutral bucket uh we then have um for more for the bare Market we have fixed income type strategies so we do uh we do funds that have over collateralized lending uh on centralized platforms um fortunately they avoided all the uh non collateralized lenders like uh block fire and Celsius um and they've actually got a very long track record they've been

operating for over six years very consistent 12 to 15% return volatility at one on the returns um so you know that's what that's the sort of profile we have in that fixed income bucket and we have Market making so we love Market making as a strategy as a traditional hedge fund investor we can't invest in Market making strategy all market makers are really proprietary Capital Citadel securities good luck investing possible Sasa Jane Street jump they're all private proprietary Capital but because of crypto's

fragmentation because that fragmentation means you need capital on binance you need capital on Kraken you need capital on bitfinex bitrex etc etc etc it's very Capital intensive so in this brief window while we're growing this asset class the market makers are in some cases open to external Capital so we really like that as a fun strategy because they make money um really when things get very distressed so you look at um August we did very well in the fund in August because we had Market making strategies even though Bitcoin and the rest of crypto was down

somewhere around 12% or more we did very well because the market making strategies that's when they do very well it's when you have high volume bit of distress people trading crossing the spread panicking unwinding trades it's very profitable and then the final fourth uh bucket that we have is um the directional bucket which we play with based on signals that Willie's seeing on chain um and we use basically Quant strategies predominantly Trend uh for that directional piece so when the when the market neutral bucket is paying us more money we can lean a little bit more into Trend because that market mutual buket buffers our returns as I said

before we don't ever want to have a draw down mon so it's very important that any directionality we have in the portfolio is well protected by solid returns in the market neutal portfolio so that's sort of a a quick overview of the various different strategies and uh yeah we're we're very excited we find I mean when I had the last fund that I mentioned we had a fund like this in my previous firm uh it took us two and a half years to find seven investable managers so to give you an indication of the maturing of the space since we launched that Fund in 2019 today in 2023 it's taken us obviously we've been

researching the fund for a year now but we've we're live for four months we're going to be 10 funds in the portfolio by the 1 of November so it's uh it's obviously showing that we're really seeing a maturation and the key has been actually Managers from the likes of Citadel um Brevin Howard these very competent hedge fund managers moving over into crypto obviously we love that because they understand what it means to be an institutionally investable manager perfect deila do you have anything to add uh should we try to see if there's any

questions from the audience or any questions does anyone uh listening have a question for Richard where can they find out threee questions I see some um okay no uhu yeah okay here Stefan was asking you rard if you think orinal nft on bitcoin network if they have a positive or negative impact on the Bitcoin [Music] ecosystem yeah it's a very good question um I spent a lot of time thinking about

it when it all sort of blew up and uh the congestion that it created on the Bitcoin Network and obviously uh B rise that we saw um it was very Pro very profitable for miners when the whole ordinal uh phase was going nuts um I think that you know you asked me a question before about crypto broadly and nfts and is their value sure there is the fact that now the most decentralized Network that exists in crypto has the ability to essentially have nfts is interesting it's certainly interesting I I'm not going to say whether I think it's good or bad I think

you know the reason that I was first attracted to bitcoin as I said at the beginning was because you know I was I was interested in the hard money aspect um do I need my gold to be able to have the functionality to draw pictures on it or uh have people's property Deeds on it not necessarily but you know it's it's a free and open network um you can make whatever you want out of gold you could choose to make a necklace or you can choose to store as a gold bar in your Vault um if you choose to uh change or imprint one of your stoes with an ordinal um then good luck to you um I

think that might end up identifying you on chain at some point um so you know you got to think about that and obviously in a world of you know increasing authoritarianism across the globe do you want to be linking your Bitcoin to your art collection I don't know I I don't know what the right answer is there are certainly greater minds than mine that have debated this subject um I don't have a particularly strong view about it I feel that you know Bitcoin is uh how you want to use it is for your enemies as well as for your

friends maybe we'll take one last question from David is this the last question are we having here and he asked of the four categories which are the least sat rated which one would you recommend um as a qu manager with or with a count manager focus on how to provide the best differentiation for investor it's an excellent question David and the reason why we create the Diversified portfolio is because in different Market environments you get different things that do well um obviously in a trending Market uh a CTA manager will will do

very very well uh in a quiet Market you probably want to be leaning more towards the fixed income strategies um in a volatile high volume Market the market makers do extremely well um but in quiet times you know remember it's Capital intensive you got a lot of infrastructure if the volume's not there is it can be a painful bleed so I wouldn't say there's any one particular one and that's exactly why we've constructed the portfolio the way we have to provide you a consistent return uh through any type of environment but it's a very good question okay perfect and now we have the closing question question from

fra and he asks if seeds is only addressing their product seeds capital is only addressing their product to institutional asset manager or is or or if also private banking clients are um allowed to invest in these products um so yeah look Fran the the product is open to professional investors in Switzerland it's a lot easier um so you know obviously we can have discussions like this in switzland with crypto Valley um because it's it's open to professional

investors um in other jurisdictions it can be a little bit more problematic obviously more institutional investors uh can participate pretty much from any jurisdiction they're normally set up to be able to do so um we don't have a US feeder vehicle at the moment we do plan to launch one uh once once we hit 100 million in a um but yeah I mean it's not just for private bank clients of course obviously CES Private Bank clients do uh invest in the product we have other private Banks as well UBS uh ubp uh Quint quintet Bank who I hadn't heard of but they participated and even

Swiss gr um so the the fund is available through Swiss quot um you have to be able to look it up but yes it's called Seas Crest and um yeah it's open so it's not just for private pain carts great thank you very much Richard thank you very much DEA thank you very much for everyone who attended I hope you have learned something I thought it's very very interesting to talk to you Richard I mean a you have very strong convin convictions but you have also the knowledge and the data which support it it's not just as you have rightly

mentioned it I think you're a Bitcoin Enthusiast but it's really you have well studied and well researched and you know it's a um I think it's your very honest opinion based on your knowledge and that's makes it so valuable to talk to you thank you very much for the time and the Insight you gave us thank you Mar than bye bye everyone have a good evening pleasure very enjoyable thank you thank you