Cryptocurrency hedge fund Nickel Digital Asset Management stopped implementing strategies after the market crash in May and is waiting for a return of optimism to resume operations. The firm's CEO, Anatoly Krachilov, said in an interview with Bloomberg.
Headed by former JPMorgan and Goldman Sachs employees, the $200m AUM fund expects a "parabolic" rise in digital asset prices. Previously, arbitrage between the value of 12 assets across 17 spot and derivatives markets provided double-digit annual returns for institutional investors.
"Our market-neutral strategy with low volatility gives a positive profit expectation regardless of the direction of the market. This makes it easier for investors with low risk tolerance to enter the crypto market," Krachilov explained.
According to the publication, Nickel Digital Asset Management has had a return of 29% since June 2019, with a volatility of 3.5%. Cascades of liquidations of crypto derivatives in May neutralised previous arbitrage opportunities.
Krachilov said the fund's wait-and-see stance, which is typical for investors in the cryptocurrency market.
He said clients of Nickel Digital Asset Management are gradually abandoning the notion that digital assets carry reputational risks.
Recall that Intertrust analysts predicted an increase to 7.2% of cryptocurrencies in hedge funds' net assets by 2026 (~$312 billion at the time of publication of the study).
According to a recent PwC report, 21% of "classic" hedge funds with $180bn in AUM have already invested an average of 3% of assets in the new class of instruments, and most plan to increase this volume.