2025 and Beyond: Crypto Asset Opportunities for Institutional Investors | EBC10

afternoon everyone . Thank you for joining this discussion. Today we are talking about the future of 2025 and beyond . And the opportunities crypto assets offer institutional investors. I am delighted to be leading this session with two other hedge fund managers, Roman and Tara delighted to be leading this session with two other hedge fund managers, Roman and Tara .

First, I will briefly introduce myself and introduce myself and then hand it over to them . My name is Inigo. I am the managing partner of A &B Investments . We are implementing digital asset strategies . We are a hedge fund.

We are headquartered in the Cayman Islands . We do market neutral and quant long-short systematic strategies . Tara? I'm Tara Macaulay. I am the CEO and founder of the Faeroes Fund.

We started in 2018 , and before that I was the co-founder of Alameda Research . We have implemented over $600 million worth of market neutral strategies across various tokens . Hello. It's a pleasure to be here, Inigo. Tara.

My name is Roman Gonzalez. We launched a 100% crypto fund . This is the first 100% crypto fund regulated in Spain. Regulated by the European organization . Let's say it's a collective regulatory system .

I have been following the sector for over 10 years and we want to provide long-only support to the crypto asset sector through our fund . Good. We have two different speakers . Both are doing digital asset strategies , but. Tara, you are following a market neutral strategy .

Roman, you manage a long- you manage a long- biased fund , right? I think you trade with different parties and encounter different issues on a daily basis. So, I hope we will have an interesting conversation . I would like to ask Roman to answer the first question . How do hedge funds and other institutional investors approach adding crypto to their portfolio ?

Yes, I think what I call ' moving away from 0%' is happening now . Institutional investors have begun to actively explore this asset class . I think it was joke for them in the past . But now, with big companies launching ETFs this year , they think 0% exposure is a risk . They are researching what kind of products they can choose, how they can have at least 1% or 1.

5% exposure . Why do you say 1.5% ? Because that's the value of the cryptocurrency market based on all the liquid assets in the world. So, if you hold less than 1.

5% , it means you have invested very little in this sector . I hope that percentage will be even higher in the future. Of course. Yes. In my opinion, there is a huge opportunity right now because the 60/40 investment portfolio showed the worst performance in the past year, so institutional investors and family offices are interested in diversifying their investment opportunities a little more .

With fears of an economic slowdown and interest rate cuts , we are seeing everyone trying to increase their investment in alternative investments and hedge funds, wanting to protect their capital. So, I think we're only now starting to see more progress. Tara, do you think there are any unique strategies that are suitable for certain types of investors ? I think it depends on their investment goals. As Roman said, for pure diversification benefits benefits , I think investing between 1 and 3% would be helpful for any portfolio .

In a market neutral environment, we see investments from those seeking stable income and income that is suitable for all weathers, especially those who prefer liquid investments that are easy to get in and out of . So, we've seen a lot of growth from alternative asset investors . Next we come to risk management and security , which is a key topic for hedge funds, right? This is even more important in this industry or property category. What do you think are the biggest factors when managing risk think are the biggest factors when managing risk ?

And how do you reduce them ? In crypto, counterparty risk management is the most important thing. That's the first thing you need to do. Of course, you also need to manage liquidity and your trading risk, especially if you use leverage , as this is a very volatile asset class. Many people who have traded in volatile assets in traditional finance (TradFi) come to us and say, " Wait, have you seen meme coins ?"

That's what I ask. So, even closer. It's loud . But when it comes to counterparty risk management, there is still a long way to go . I think this is an area where crypto has unique risks , and we had to develop crypto- specific solutions for this .

So, after the collapse of FTX, we have seen a huge growth in off-exchange settlement solutions. Sometimes, these are crypto- based companies , but they don't have a formal balance sheet. So, in some cases cases , you are shifting your exchange counterparty risk to a much smaller custodian or technology provider . So, I think that to make a real difference in this industry , large companies with strong balance sheets need to offer custodian services . Yes, our study is only focused on long- term investment .

So, we use crypto ETPs across Europe . In terms of risk, our main risk is archiving, i.e. the solution within each ETP. What's special about Europe is that we have some diversification among different custodians and ETP providers .

For example, 21Shares, Fidelity, and many more . They have chosen various institutional custody solutions like BitGo, Zodia, and not just Coinbase Custody, but also what is happening with ETFs in the US . Therefore, archiving is one of the main risks in crypto. For us, that's the only risk because we trade spot , we don't do derivatives, and there's no counterparty risk because we're all using physically backed ETPs . I know this is different from the strategies you are dealing with, Tara, but in my personal opinion, it is better to keep it simple for large sums of money that you want to invest in the crypto sector.

So, let's trade spot and continue to maintain that position. I think we will get more than 40 percent annual returns in the next 10 years. This is the largest amount that can be earned. To those here, 40% annualized returns for 10 years may seem low, but that's 28 times your capital , which is a huge deal. If you have the patience to endure its ups and downs ...

to face all the ups and downs and the more than 50 percent declines we will see in the future. For us, it's really about risk-adjusted returns. So, since there is liquidity on Binance and many unregulated foreign exchanges , we have to trade on those platforms . The advent of Bitcoin ETFs has been turning point for us , as we are now able to trade more in a regulated market. However, prefer to trade elsewhere, even though there appears to be a higher downside risk prefer to trade elsewhere, even though there appears to be a higher downside risk .

To justify investing in those places , we just need to make sure we get the most profit . Therefore, we seek to limit risk by diversifying our capital and trading across multiple regulated and unregulated exchanges. We will enter and exit depending on where opportunities are available. That doesn't mean we won't trade on a tenth-place exchange that has only been in operation for a year. We will only use 2% of our capital on it .

We will only do it when the opportunities are very good and we think the exchange is in good shape ; We track on-chain data, deposits, and proof of balance . Exchanges openly disclose their financial information, which helps us assess the risk there. We input that into our risk model and consider whether the return on investment will cover that risk . Compared to traditional investments or other alternative investments , the performance in financial terms is tremendous, with CAGR rates being very high. Sharpe ratios are also high, but institutional investors haven't arrived yet, right?

We have been waiting for them for 3 to 5 years . We always say they keep knocking on the door, but they don't come in. Finally, what is stopping them from entering this field on a large scale, Roman? I think they are still afraid. Like I said, I think they still see this industry as a joke in their minds .

Maybe Sorry for saying this. But of course this is changing. Like I said, they really do due diligence research . When you want to enter field now that you haven't been in it for more than 10 years , researching for it is very important. As you know, the characteristics of this property type are different from traditional ones.

So, it's difficult to manage everything in the beginning, but we're getting calls from many institutional investors who want to explore this asset class with us . All they need is education, so I would like to say that sir, the institutions have actually already arrived . Many of them are quietly making experimental investments on a very small scale . We have been in discussions with pension funds, American foundations, and all kinds of institutional investors . When talking to them, they are very knowledgeable .

They have been researching and learning about this field for the past one or two years . But I think one thing that's holding them back is the reputational risk. You know that there have been large-scale frauds in this sector. So I think we need to do our best internally and build trust by creating enterprise-grade products. Companies are investing in this sector , but they are waiting to gradually grow, establish long-term relationships, and see the sector mature .

Yes, I agree agree . It's not just about reputation, but I also think the sector is not mature enough for them to invest in a big way. In fact, we need better guardians and clearer regulatory rules. Yes, on our side, many institutional investors want to see at least 3-5 years of operating data, at least $100 million in assets under management, concentration restrictions , and you need to pass their operational due diligence. We have 7 years of experience and we were able to do it, but getting these institutional investors is a big hurdle for smaller financial institutions .

Those companies will only think about this if they want to invest hundreds of millions of dollars . So, they need different financial institutions to invest at that scale , only then can they make a big difference. Of course. Another interesting topic is topic is DeFi, right? Decentralized finance.

Tara, I know you are somewhat involved in the DeFi space at your financial institution. We do not trade directly in DeFi. Since we are FCA regulated , we mostly only use it for DeFi lending and borrowing . We cannot trade in anything that is not KYC verified, so we cannot participate in AMMs. But we think that DeFi is the 'Wild West' of the crypto world.

There are huge opportunities in this , but there are also new and emerging risks. Therefore, many financial institutions are operating in that sector and earning very good returns . But DeFi is very new, so there is no long-term performance data in that sector. So, we will take data from that environment and use it in our pricing models for trading on centralized platforms , but we have a view that we will not get too deeply involved in that right now . But, it's growing , and I think DeFi will be a great application for crypto in many ways .

It has certainly led to great growth in that environment , so I'm keen for it to continue . But, do you think DeFi will play a role in institutional investors' strategies in the future ? Of course. I expect that as tens or hundreds of funds come in, many of them will focus on DeFi, market neutrality, and various strategies in the crypto sector. But, you know, we are only a long- term investment fund , and now we are investing in projects .

Our investment portfolio includes projects like Uniswap. Yes, we have great confidence in both DeFi and Ethereum . In my view, there has been a somewhat negative perception of both Ethereum and the DeFi sector over the past few weeks or months . But, we continue to be very optimistic . We hold a large percentage of Ethereum as an investment , with over 23 percent of our investment portfolio held in Ethereum .

Also, we have invested a small percentage in projects like Uniswap . You will be able to see real income in these projects . You see real returns in real protocols that are actually used in the environment see real returns in real protocols that are actually used in the environment . Why is n't the Ethereum ETF as successful as the Bitcoin ETF? Have you seen the ETH/BTC price chart ?

It has been decreasing for the last 2 years . So, I think one reason is that a strong narrative has been built around Bitcoin and how it fits into the investment mix. But it's hard to explain it to ETH . I think this will be less attractive to investors unless the price increase justifies it . We trade a lot of Bitcoin ETFs , which has been great for us, but we're not as involved in ETH .

Because trading Bitcoin offers high capital efficiency. Due to the extreme volatility in ETH, we have to keep it on high margin . So, we need more profit from those products to invest in that sector . We don't see a similar premium in ETH compared to Bitcoin to justify that. Good.

There are still a couple of minutes left to finish . Just two questions . The first question is for Tara. Looking ahead to 2025 and beyond , what is your prediction for corporate adoption of crypto assets? Do you think it has arrived ?

Will this take longer I think this will continue to improve, but we are still in the early stages. When we talk to many people, they only invest 0.1% or have n't even started yet, so I think the market value will go up to 10 trillion. I think stablecoins will reach trillions of dollars because their growth, especially interest-bearing stablecoins stablecoins , is easy for investors to understand. So, I am confident that crypto trading volume will grow 5 to 10 times in the next few years .

This will not be a smooth path. Good. Roman, do you see any trends, blockchain solutions, or new innovations that could change the future of institutional investing ? Of course, you're asking about the crypto sector . Yes, there are a lot of opportunities there .

We place a high emphasis on narratives because people are not just investing in tokens , but also in the stories behind them . So, DeFi narratives are so popular right now, we're trying to allocate some space in our fund . We have a small investment in projects like Sui . Of course, we have Solana in our portfolio, but I want to end this by talking about Bitcoin , because it is undervalued in our thinking and investing . Despite all the infrastructure and hype surrounding blockchain, it seems like no one is talking about the actual technology, which Bitcoin, Ethereum, etc.

For us, Bitcoin is a technology technology . It has some properties that the world didn't know before 2009 , and in my opinion it will be difficult to create something like Bitcoin in the future. It has over 98% of the world's Proof of Work, and it's now complete complete . There is nothing better than this in terms of proof of work. So you should consider that space in your portfolio .

I was going to ask if you two are on the rise or on the decline , but I think you've already answered that. It's always like I'm going down in the short term and up in the long term . I understand I understand . Are you in full swing ? Yes, the on-chain indicators and short-term sentiment indicators we follow have been very bearish over the past few weeks.

We've recovered a bit now, but I think it will see huge growth in the coming months . The interesting thing about crypto is that you have to be prepared because most returns are only available in six or seven months . So, some investment needs to be made, yes. Yes. Yes, that's right.

Like everything else, it 's better to time the market than to wait for the right time in the market. Of course. Thank you very much to everyone who joined this discussion. Thank you, Taran Roman. Thank you.

We will talk soon. Thank you.