NEW YORK: The cryptocurrency space is going through one of its toughest stretches, with exchanges and lenders struggling, and token prices collapsing. But one company has been able to weather the volatility.
Pythagoras Investment Management LLC has two funds that have been rare bright spots in a market that has been gutted by a series of scandals.
Both his market-neutral fund, a strategy that has no exposure to the price of any crypto at any time, and his trend-following Pythagoras Token Fund have each gained around 8% this year, according to the company.
Meanwhile, the world's largest digital token, bitcoin, is down around 60% this year.
"We particularly outperform in bear markets," said Mitchell Dong, chief executive of Pythagoras. "Our absolute return funds are positive whether the market goes up or down, whether it's a bull market or a bear market, we're going to have positive returns."
Pythagoras' neutral market fund employs arbitrage, which means it buys the same cryptocurrency in different places and prices at the same time, buying low and selling high.
Meanwhile, his trend-following fund uses technical indicators to spot short-term trends in the crypto market, Dong said.
The crypto market has been embroiled in scandal in recent weeks as Sam Bankman-Fried's high-flying crypto exchange FTX filed for bankruptcy, reminding investors of the implosions of other digital asset firms earlier this year. year. The FTX collapse also dragged down other companies.
The Pythagoras arbitrage fund had 10% exposure to FTX before the exchange crashed. The company says it requested a full withdrawal of funds and received around 7%, prompting it to cover by shorting FTX's native token, FTT.
The FTX collapse caused a drop in cryptocurrency prices, with bitcoin at one point dipping below US$16,000 (RM 70,088), well below its highs of near US$69,000 (RM 302,255) just one year. The coin is now around US$17,000 (RM74,469).
Pythagoras' fund strategies are based on the fact that cryptocurrencies, which are global and traded on numerous exchanges, are driven by retail investors, Dong said.
โThe idea is to use quantitative technical indicators to try to spot trends, whether it's up or down,โ he said. โWhen you spot an uptrend, you go long when you think the psychology of people is that they think it's going up. And when the trend is down and everyone is selling, you go short.โ
Dong, whose previous roles included managing hedge funds for more than 25 years and trading uranium and electric power contracts, among other things, founded Pythagoras in 2014 after bitcoin caught his eye.
โBuying and holding bitcoin comes with 90% withdrawals. That is not my risk-return profile,โ she said. "I want consistent returns of 1% to 2% per month, without losing months." โBloomberg
