Through the crypto winter – in November and December of 2018, Bitcoin was down 35%, while BitBull’s Opportunistic Fund (“BitBull”) returned +29%. How did we outperform the bear market which negatively impacted the entire crypto space? In this article, we cover some of our strategies. For more returns, please visit www.bitbullcapital.com.
BitBull manages two funds:
- Opportunistic Fund, which directly invests in cryptos in a variety of ways,
- Fund of Funds, which has done diligence on hundreds of the 600 existing crypto funds and their strategies, and is an investor in 10. We continually do diligence on new crypto funds, and allocate to ones that we believe will return well, as well as rebalancing our existing crypto fund investments monthly.
BitBull’s investments in many crypto hedge funds, and diligence on hundreds, gives us a unique vantage point in terms of identifying such opportunities and leveraging them to the fullest.
Our Opportunistic Fund benefits from two main activities in general:
- Identifying opportunities (Basic Attention Token and Tezos are two recent examples)
- Active fund management (a mix of market neutral and directional strategies)
While BitBull Capital’s Opportunistic Fund’s strategies include market-neutral activities such as arbitrage, much of the returns are due to selecting the right assets at the right time. For example, in the recent negative months, such as November and December of 2018, and January of 2019, part of the way we were able to have positive results was due to our contrarian–and correct–viewpoint that crypto would continue to drop, and waiting for those drops before buying in, then selling on the rise.
We are also proud of consistently achieving these results with relatively lower risk. With BitBull’s Opportunistic Fund, we attempt to be the rare crypto fund that achieves results while maintaining a low Value at Risk (VaR); while many other crypto hedge funds may drop during months that crypto drops because of a high VaR. This enabled us to return positive results like +13% in November and +14% in December when Bitcoin returned -36% and -2%, respectively.
We’ve also shown an ability to return more than Bitcoin in its positive months; for example, in February when it returned 11%, we returned 32%. Notably, Bitcoin is a single asset, while BitBull invests in multiple assets. For asset selection, we engage a number of strategies. We’ve found there’s no substitute for actual research and hard work. Our catalyst-driven investments have repeatedly returned for us. Our strong network within crypto and blockchain, from technologists to journalists, first-hand deal diligence, acumen over years of investing in the space, and presence at major crypto and blockchain events helps us continue learning and acquiring recent and relevant knowledge.
Some examples of our network and diligence:
At the Coinbase’s private event for institutional partners, where their CEO Brian Amstrong discussed Coinbase’s roadmap and that they were soon going to custody Tezos on Coinbase. Tezos is currently up by 12.84% in April.
Listening intently to Clay Robbins, Ecosystem Lead at 0x, while we were on the panel at FinTechSV’s Crypto Exchanges event.
- Equity (our fund of funds includes equity in Coinbase, mining companies, and blockchain technology ventures, among others)
- Event-driven, catalyst-driven, and special situations (Tezos example)
Market-Neutral and Relative Value:
- Volatility-weighted positions, leveraging crypto’s unique volatility
During a bear market, such as the one in 2018, market-neutral strategies can do exceptionally well, provided there is proper risk management. We were able to successfully utilize strategies such as volatility trading and arbitrage to generate alpha during this stage.
For the current scenario (in 2019), where Bitcoin has once again appreciated in price, we were ready at BitBull to capitalize on that and indicated the possibility of Bitcoin posting positive results in our February and March investor updates.
A key factor behind posting positive results is the consistent realization of gains. Most investors hold digital assets for long periods, foregoing the profits which can be attained via active portfolio management. For example, if the market is displaying considerable volatility within a range, there are opportunities to move in, realize a gain by selling at a higher price and repeating the cycle, instead of waiting for a broader market recovery to realize profits.
At BitBull Capital, our research also focuses on identifiable market behaviors, such as recent observance of Bitcoin rising, while most altcoins either froze or posted slight declines. This continues until Bitcoin finds a stable price range to consolidate in, and that is when profits from the surge spillover into other assets. This is a new trend. However, the downside risk to this is also worth mentioning, where when Bitcoin drops in price, the effect is typically exaggerated for altcoins.
Ultimately, active management involves a host of activities and consistent portfolio balancing in light of market dynamics and emerging opportunities, whether they are driven by specific events or present themselves as promising deals.
As always, we remain committed to achieving optimal results for investors and continue to change our strategies to suit the prevailing market dynamics and environment.
If you have any questions about BitBull’s Opportunistic Fund, please feel free to contact us.