Crypto Hedge Funds: Surviving the Winter and Positioning for What’s Next | EBC12

Thank you very much. Glad to be here. Good day everyone. I mean, when we were writing this headline, going through the winter, um, that was before the market crashed in August. So, I guess we still have to decide if we're in winter yet.

But we have a bunch of smart money on the panel, like hedge funds, I mean. So, um, let's, um, let's wait for the next 40 minutes if that's the case. But, before we start, I'll just let everyone introduce themselves, and, um, and then we'll get started and then we'll get started . Good afternoon. My name is Mark de Kluwe.

I am a partner at Theta Capital. Er, so who is Theta Capital? We are actually a 25-year-old company that has been investing in hedge funds for Dutch, ahem, clients for the last 25 years. Um, but since 2018 we have also been investing in blockchain, namely, um, venture capital in blockchain. We are actually Europe's largest, um, investor Europe's largest, um, investor , institutional investor in blockchain venture capital.

Um blockchain venture capital. Um , we have this hybrid mix of hedge funds and venture capital. And I'll go into a little more detail about that in a minute, but for now I'll turn it over to Ryan to introduce us. Thank you, Christopher. My name is Ryan Abner My name is Ryan Abner .

I am a portfolio manager at Fortius. Fortius manager at Fortius. Fortius is, um, a digital asset management company that spun off from Schroders, um, 5 years ago. And we have two main strategies. We run a discretionary upside- oriented fund that I oversee, and we also have a multi-purpose platform where we allocate funds between crypto hedge between crypto hedge funds.

We track traders and, I don't know traders and, I don't know , look for alpha , look for alpha assets on our SMA assets on our SMA platform, and we also deal with internal risks internal risks . Um, I'll pass the word to you, Aaron. Thank you, Ryan. Uh, I'm Aaron Angerer. I work at, um, Banque de Luxembourg.

Banque de Luxembourg is a small, 100-year-old bank in France. Uh, with a very, very high level of risk, because the traditional business is payments with risky countries and companies under Chapter 11. And Banque du Louvre is very innovative because it is the first French bank to switch to cryptocurrency as the first registered cash register, and since last year we have had an MCA license. So we have a full range of crypto services, from market access, storage, and starting this year we started active management of crypto assets in the bank. So I came from traditional financial portfolio management throughout my career.

And I started... career. And I started... started with cryptocurrencies in late 2019-2020 , always trying to combine regulated traditional finance with cryptocurrency. So asset management is always in a regulated way, because I believe that the two worlds need a regulated space to develop.

So thank you. I am George Sarria. I am the founder and CEO of Bquant. We, Bquant, are the first premier broker in the digital asset space. We're almost nine years old, believe it or not.

My background is in traditional finance traditional finance , prime brokerage e-commerce e-commerce , so I've worked in emerging markets, and now this is another emerging market, which is cryptocurrency, and we tailor funds primarily to professional traders who value the funds. We are also a fund allocator, we allocate funds primarily to market-neutral strategies, so we work with both sides of the world: both the buy side and the sell side. Hello everyone, Konstantin Kogan, I am the founder and CEO of Holistic Capital, where the multi-asset, multi- strategy manager works primarily with high and mid-frequency. I also do well with the later stages of PIP later stages of PIP . My experience is this: I worked in the first crypto fund of funds back in 2017, went through three cycles, so I think anyone who wins at least two cycles will already understand how fun it is.

I'm delighted to be here in Barcelona for the first time speaking to this group of wonderful gentlemen, and I promised when we spoke to Christopher that we would have lots of fun and provocative statements not to keep people awake, so I'm still committed to that. This is the goal. Okay, nice to see you here, Konstantin. And just to wrap up, I'm Christopher Sidentop. I manage sales at Capture Investments, the liquid asset management arm of Fred Pai's family office, Fred Pai is the founder of 3iQ.

And we offer two strategies: a directed actively managed mandate and a market-neutral DeFi stablecoin strategy. So we're multi-strata, and I think we're going to talk a lot about multi-strata today because, really, we want to get to the heart of how to survive winters, and I think "winters" here means, you know, black swan events in cryptocurrency that then lead to long market declines, and also generally how to deal with volatility in crypto markets. So maybe I'll just pass the ball to you, Konstantin: How do you...what do you think is the key ingredient? You went through three cycles to survive these cryptowinters in a couple of minutes.

First of all, keep in mind that it's like spring comes after every winter, right? So, I think that's the first positive thinking. I know it sounds boring, but this is, I would say, one of the most important parts most important parts . If you look at the four-year cycles and how we've navigated before navigated before , it's been like this every cycle , and we've had very predictable alpha and very predictable volatility coming in. For example, a simple example that is trivial to the people sitting here, but maybe it's just an interesting fact to you.

For example, you know, even the simple fact that there isn't much activity in the summer . That's because a lot of managers are having fun in Ibiza or Mykonos and they're not really actively trading, right? It sounds very trite, but it's one part of the game. Now, in September, we also usually have a lot of people coming in, not only returning, but also regulatory and compliance stuff, which comes in mostly from Asia or the United States. For example, we've been looking a lot recently at, for example, the Korean market, which is bringing a lot of new fresh liquidity.

Unfortunately, in the US, we saw again that the Clarity Act was not passed, but, uh, the SEC and CFTC are still hard at work on creating a deeper taxonomy of digital assets, which greatly helps institutional implementation. Overall, I think there's nothing new we would say that people here probably wouldn't be able to understand, but, uh, the approach we take is always to focus on risk management. I think these are, again , extremely important factors, regardless of the cycle. Does anyone else want to comment? I, if you allow me, yes I, if you allow me, yes .

So, I mean, I think this particular winter is definitely one of the mildest in my entire history, and if you look at the numbers, I think we only had a drop of about 49% compared to, uh, something like 70-90% in previous cycles. So, uh, I mean the numbers speak for themselves speak for themselves , but, uh, I mean the previous, uh mean the previous, uh , winters were also somewhat related to, uh, well, system crashes, uh system crashes, uh , FTX and Lunas and so on. I mean, this cycle, again, we only saw on October 10th. I might call it a landmark event for the industry, but even that was, again, a, well, lived through, for the most part. And, well, I think, yeah, I think we're in a kind of recovery phase right now, well.

Can I argue that a little bit, because, well, it depends on when your winter started. Truth. I mean, my winter started, well, around '22, I think. And yes, even though Bitcoin only fell 50-60%, I mean, a lot of really good projects actually fell 98 with a small percentage. So, I think it really hurts on one side.

Um, and on the other hand, it's also, well, yeah, you're saying there's no mass collapses or/and/or things going out of business. I disagree of business. I disagree . I think the number of fund managers that are closing down, the number of projects and protocols that are actually being abandoned. Of course, these are the best indicators for the bottom of a bear market, but, you know, we have been investing in cryptocurrency since 2018 as well , and we would like to compare the statistics of how many projects actually go bankrupt compared to a traditional venture capital fund.

You know, in a traditional venture fund, a third to a half of your portfolio is reduced to zero. And the projects we invested in before the beginning of this year didn't even reach 7 or 8%. Hmm, that's actually a pretty good number. Of course, we have some negative selection because we try to choose the best managers best managers . However, it is still a very good number.

But it is still starting to grow. And you can see how last week's balancer just goes right, that's all. We gave up. You know, you have exchanges. We give up.

So, hmm, I think in some ways it's going to be a little more painful than we'd like to think we'd like to think . But we haven't seen the usual amount of mergers and acquisitions that you would normally see in a traditional market. You know, buyers come and buy assets. Here, people just close their shops and move on. That's because they probably shouldn't have opened stores in the first place.

Hmm, I'm more on the protocol side, and this is essentially an opportunity, because in the future, and especially this year, fundamentals are important . And by fundamentals, I mean, are these guys qualified, as a management team management team , to build and run this business? Do they have a product that makes sense? Does it have a market they can develop? And can they monetize this market and economically tie it to a token?

And most of them in the last few years, you know, 95% of the things that were launched didn't make it. But this year it is more important. Inventive market designs that, you know, work this way, with basic financial metrics and principles. And that means that in the future the threshold for launching something will be higher because market participants like me and, you know, these fantastic people on the panel will be paying attention to it. So when you allocate investments to venture funds, you and, like Mark, they will have a richer, you know, hunting ground to build these businesses.

So that's what I'm excited about. So does this mean that, uh, the universe of investment assets, once they get listed, is actually quite small? Because these are no longer 10,000 projects or protocols. It's maybe two, three, four handfuls. How do you see it?

So, well, were there always 10,000 protocols? Really? Do we need 10,000? This is not. But what then is investment space?

What should people pay attention to? Well, okay, in my opinion, uh, there are only a few of those so far. But the reality is that as the situation develops, and you know, everyone says it's winter here, and it's sad because it's winter now, and funding is being cut off, and businesses are closing, but just look at this event today. Look at all these fantastic people here this week. I was here last year at the same event and everything had completely changed.

Uh, and I think that's what will move everything forward. Uh, why am I more excited, and I think we all are. Yeah, and I would like to add that, well, I understand what Mark is saying, but to me it's just, uh, the market is maturing. So, uh, unhealthy, let's say, uh unhealthy, let's say, uh , protocols, projects or protocols that don't actually solve, uh, the right problem, they collapse. And so it affects VC, VC, VC portfolios because a lot of coins are illiquid and they're on the VC side , but, to me, if you stay in liquid coins, liquid cryptocurrencies, and I think it's just a time for sell-offs.

This is not winter. It's just sales time. You need to buy. This is need to buy. This is , um, a good opportunity , um, a good opportunity .

Can I... Can I just...I think it's really important to distinguish as we move into a broader spectrum, you know, we're talking about very different strategies. Market neutral, you are interested in liquidity are interested in liquidity , depth, you are not really interested in cycles. Volatility is your friend.

When you talk about a venture strategy and 30,000 shitcoins, sorry, then you only have 70 that actually create value. According to the P-factor analysis, if you really look at, and I want to follow up on what Ryan was talking about. Do they even have a reason to exist? Projects that were designed around token economics to actually fail or simply cause them to falter and depreciate, with inflation killing the entire economy? I think not.

So the strongest survive. I'm actually glad that fewer people have made the commitment and they're learning the evolution of what needs to be done. Perfectly. And then, and look, I think there are a few themes emerging here. One thing I've noticed is that winter, whether you want to call it winter or not, is different from 2022.

We had no OTC settlements in 2022. We didn't have the regulatory clarity we have regulatory clarity we have now. So, you know now. So, you know , to position yourself as a hedge fund, you already have this positive environment positive environment . Regarding Ryan's comment, protocols that are currently generating revenue.

I want to call it Uniswap. I want to call it hype. You know, they exist for a reason exist for a reason , and they will become the winter , and they will become the winter from which the winners of this winter will emerge. You touched on the topic of market neutrality, and, you know, I think one of the points I would like to make clear is that I think it's no is that I think it's no longer possible to run a crypto hedge run a crypto hedge fund with just one key thesis. I think you need to be able to navigate and be flexible in these different market regimes.

So, whether it's directional market neutrality, let's double down on market neutrality because there are different segments in it , and it feels like liquidity completely evaporated on October 10th, and, George, when you said the winter was mild, I think October 10th was pretty brutal for some people. But maybe for the audience, uh, if you guys could highlight what market-neutral strategies have been winners over the last 6-9, 10 months last 6-9, 10 months , that would be extremely interesting. If you allow me, I will begin. What we have seen is also the survival of the fittest and the smartest. So these stupid strategies, I do n't know, basis trading obviously collapsed en masse, and that's where the bulk of the money was actually parked, and that money is still, you know, looking for places to redistribute.

But, redistribute. But, uh, statistical arbitrage, uh, market-making HFT market-making HFT strategies continue, uh, as they always have, and again , uh, we've seen increased competition from, uh competition from, uh , a growing number of very smart quantum tools coming into the space from TradFi. And, uh, and existing groups are also constantly developing new strategies, new alphas. So the space is becoming super competitive. And, uh, it's a cycle, like the cycles I've been in in emerging markets.

So it's the same thing over and over again . Ultimately, you won't see any arbitrage, cross- exchange arbitrage. You won't see, you know, basic arbitrage strategies. They will disappear. What will be left are, you know, the smartest, uh, smartest alphas.

And, uh, that's it. Anyone else want to join in? So, uh, we, uh. So, if you don't consider, uh, all coins, we also have, uh, a market- also have, uh, a market- neutral, uh, multi-manager platform. So we go out, go out and find managers find managers who are best in class.

We're also looking for, uh, trading teams that don't want to manage the fund. Uh, and we're kind of combing the land, uh, all four corners of the world to find these guys. And there are, you know, incredible talents there. And we also take risks internally. So this year the main topics were, to start with, uh, it's on the market-neutral side that there's always a regime change.

Unlike, you know, traditional finance traditional finance , the speed of regime change, the amount of things that change in terms of how the market works, it can be very brutal. And you can be the smartest quantum, and you can have, you know, very good technology; but if you're not willing to quickly rethink and reframe things, to repeat, um, you, this is, like, this is going to end for you and you're not, you're going to lose your alpha and your edge. Hmm, that's one of the things that we really pay attention to, you know, when we allocate funds, can these guys, you know, rethink things and, you know, scale them up? And one example this year that, um, you know, I think we touched on briefly, is, um, basis trading, but basis trading, but , um, stocks and perps. Which, um, and when I mean perps, these are derivatives, um, something like hyperliquid instruments.

Which sounds very, you know, simple, and you simple, and you can probably do it at home. But, um, you know, there are some operational blockers. So, there are a lot of small funds that won't get, you know, an account at a big bank with convex leverage to get leverage. Hmm, there are even, you know, smaller funds for which opening a typical, you know, brokerage account can take months. And by then, you know And by then, you know , he's dying.

So we're really looking at how quickly these guys can move and deploy on the operational side. And the last thing I would add is that there are a lot of very small teams that are doing something very, very niche, and they are really, really good at it . And, um, it doesn't matter, trading volumes, um, on the blockchain, off the blockchain. They are simply the best in their class, and they do one specific thing. Um, you know, there are a few that you might come across, and for example, we just found an incredible manager who just does, um just does, um , market making in low-cap altcoins , um, options, for example.

And that will go some way to overcoming the, um, alpha overcoming the, um, alpha decay that we see in all these big managers who are just too small. This is not scaled. But, you know, we went and found them and, uh, kind of brought them in, you know, institutionalized them, you know, helped them grow on our platform. So it's kind of , you know, to get through it, um. I hope I answered the question.

I can add a few more words to that, just to add that yes, positioning by size is very important. For example, we only touch on BTC, but we have also started to roll out stocks and gold, because we believe that stocks online, gold online, will be the biggest markets in history. I also want to remind you that from a legal and regulatory perspective, things like perpetual futures in the United States are still not fully operational, right? Because there is no proper legislation. And when that happens, it will unlock hundreds of billions in new liquidity, which will be an incredible event for the entire industry, right?

So, uh, we're still early days, and there are a lot of managers who, as my colleagues have said, especially Ryan colleagues have said, especially Ryan , like capacity constraints. You can have maybe 20 million capacities in one strategy, but that doesn't mean you can't scale it to another, right? So the people who will survive are the ones who will constantly be looking for a new alpha, and they will be flexible enough, right? To make sure that you always, as we said, you know, you always respect the regime, but also you have the infrastructure. One thing I want to point out is that this is not a zero- sum game because infrastructure also matters.

People who have never traded, maybe just to explain, you know, you need to have, let's say, VIP have, let's say, VIP levels, eight or nine levels on the top exchanges or work with top prime top prime brokers like we have here George, right? To make sure the maker and taker are competitive. Because if you have lower levels, you know what? You just won't have the same profitability, right ? You know, even if you're the best trader in the world.

So, as you know, the institutional infrastructure, I would say, is equally important. One of the things I might want to double down on , Ryan , Ryan . You just very well pointed out or very well justified the benefit of multi-manager platforms multi-manager platforms , because they have the ability to exchange teams and exchange strategies, not instantly, but very quickly, depending on how the market regime evolves. Is this a fair argument for an additional level of commission? Will this be justified?

Do you want to refute this point of view? Does anyone else want to add their opinion? Multiple internal managers vs. external allocations external allocations ? Well, uh, we chose internal management internal management .

Uh, because, uh, it depends on the company's strategy. Uh company's strategy. Uh , what we provide is a full, uh, service, a full crypto service for our clients. So, on the other hand, we offer storage. So, storing coins.

So, we want to benefit from this infrastructure, and we, uh, have internalized the entire value chain, except for the valuation, for which we have an independent, uh, company. So, and by doing that, uh, we're competitive because we, uh, know all the costs, and uh, we're very transparent in terms of costs to the customer. So, that's our philosophy, and uh, we do our own asset management through our own process. And we have full control over cryptocurrencies. So we have, we have, we have a hybrid approach.

So I manage the direct portfolio internally portfolio internally . But again, going back to my previous points and some of the same points that Konstantin made. On the pure alpha side, maybe pure alpha side, maybe on the pure market neutral alpha side, and maybe also an allocation to venture funds, and you know what to hear, what you have to say, Marco. On the alpha side, the surface area is very broad because there are a lot of very niche things, like I was talking about these small managers. But the depth in terms of capacity is also quite limited.

So we think it makes sense to be able to choose the right, very specialized managers, but it also makes sense to take some of the risks on your own . Because to create, you know, make another example, let's say another example, let's say , there are a lot of alpha , there are a lot of alpha market makers and altcoins right now. Let's do this internally. It just does n't make sense in terms of power, cost, and, you know, requirements. And going back to my first point, the speed at which regimes change and new alpha assets emerge, you know, over time.

So, I think the best approach right now for a traditional allocator, who has maybe even been allocating to hedge funds for 20 years and wants to explore alpha explore alpha opportunities in digital assets, is really to start the journey with, you know, a sort of fund of funds approach with multiple managers. And for those of you who have been allocating funds to hedge funds for years, I would also like to hear your thoughts, Mark, because I know you have that experience. Uh, it's kind of like how hedge funds came about 20, 25 years ago, when these big fund platforms, you know, really took off, because on the fund allocator side, the education, the understanding, and the monitoring, and then actually, we just talked about this last night, and the transparency and the reporting just didn't exist. So the fees exist. So the fees you pay, even if it's a multi-tiered amount, are probably worth it right now for this asset class, and that's likely to change as it emerges.

Yeah, I mean, I'm interested in finding out how the money is going to flow into the industry, right? And I think in many ways, you know, just from a traditional allocator perspective, having a bunch of these $20 million to $30 bunch of these $20 million to $30 million funds and strategies that are using market-neutral strategies, it just doesn't scale. I mean, these might be good funds, they might make money for investors as well as for themselves, but it won't bring money into the industry. This is what we need to get out of this winter in any meaningful way. Hmm, yeah, I think you might also need to start looking at more scalable strategies.

Even just fundamental long positions, but the problem is there is no real research from the sellers that people could buy, right? So we talked yesterday and said, "Well, actually, Ryan, start publishing some of your research so people understand what the value is in the protocols that you're investing in, that they generate cash flow and profits." Hmm, and I think one of the problems is that there is no proper research. So that's pretty much the starting point. And that makes it difficult for traditional investors to even understand it.

So, if they're looking at market-neutral strategies, it's like, "Oh, wait, I have smart I have smart contract risk. I have keepers I don't understand. "I have, well, you know, the risk of money disappearing into nowhere when you have a market shift." All of these things exist in the traditional hedge fund space as well, but there are now a lot more, well, safeguards in place to overcome that. We do n't have that in this space.

So, I think space. So, I think , you know, start looking at more fundamental things. This will matter. So, anyone here who is doing any research, start posting. Just put it out there.

That would be my only thought. And you're starting to see more traditional prop shops starting to look at these things as well. There are many other things that need to be overcome in terms of infrastructure or regulatory regulation. But this too has been gradually overcome. And I think with the advent of tokenized stocks, they will also realize that they can trade tokenized stocks much better.

And then the transition from tokenized shares to tokens will be much smaller than we would like, than we even imagine. And I think that will lead to the next upswing and interest. Can I add to the issue of institutional infrastructure that Kostin mentioned? We've seen that yes, the demand for something like margin portfolio and exchange collateral management is only growing because you essentially control your risks. So, they take October 10th as an example, we had clients who are essentially just using native leverage on, you know, exchanges like Binance.

And then there are clients who use native leverage, but they also borrow funds from a prime broker like us. And again, they don't overuse native leverage. And there's a risk distribution that naturally helps you protect yourself from, you know, events like October 10th. Uh, but you can also, you know, do cross-exchange sharp, and again sharp, and again , portfolio margin improves capital efficiency, uh, manages counterparty risk through, you know, solutions like copper and so on. So, these elements become very important for important for anyone starting out as both a distributor and a hedge hedge fund manager.

Yes, and that's exactly what you see in the traditional hedge traditional hedge fund world, right? Why is Millennium, this $96 billion manager, doing so well? It's not because they have some of the best traders, but actually in terms of infrastructure, you know, they have permanent credit lines. They will not be stopped by a liquidity crisis. Competitors will do it, and they will go and buy them up.

But that, you know, the advantage of the operational infrastructure is that it's a huge advantage, and I think we need to get to that level as well. By the way, regarding Mark's point that there is no research there, I would actually dispute that. Here's a draw, I don't know if you guys are familiar with it you guys are familiar with it . They have an incredible modular system that can be configured in so many ways, and there 's a lot to it. It's expensive, so the question is , what size are you?

Can you afford that kind of research that goes to the level of a boutique store or an institutional one, right? The same goes for the research that Galaxy Digital published earlier in the year on the whole liquidity side, and we talk about the research with McDonald, our advisor and good friend, on the size of the market. That's about 21 billion in assets under management, give or take management, give or take , right? The whole liquid cryptocurrency market that we're talking about, all these gentlemen are here, right? We are talking about $21 billion.

This is nothing. In traditional asset management, we are like a small drop in the ocean. As for just 2 billion of them, that's market neutral. Because if you think about it, even the capacity is not enough. We can't , if we want to pour in another 100 billion, it's impossible.

Structurally and technically impossible. What needs to happen is we need to work together to ensure that new liquidity comes in, right? You know, it's always an effort to work with legislators, to work together, for example, to educate traditional institutions and build trust. Now let's focus a little on the distribution of funds. I think this is always a very interesting topic for the audience.

Okay, as a hedge fund manager, you managed to survive the winter, but how can you compete as a team, six people, with companies like AI trading , with prediction markets, with the SpaceX IPO? What conversations are you having with your asset allocators about bringing the focus back to cryptocurrency, and also within cryptocurrency itself, what arguments are you making as to why I shouldn't just buy a Bitcoin ETF? You know what? Typical arguments. I think it would be great to hear everyone's thoughts.

You may have asked why, rather than just buying Bitcoin, own and hold it. Uh, okay. Why not? This could be a strategy. Uh, how do you know it's the right time to buy?

When you have Bitcoin volatility that starts where stock volatility ends. So I think there is room. Some of the positions may be passive, but there is room for active asset management in cryptocurrency. And then we have times when we have very bad volatility bad volatility , which destroys value, and times when we have good volatility good volatility . I think we're going to have some good volatility over the next three to next three to six months , and that's another topic, but it's critical to me because we're facing this issue with our clients.

Or they have no experience in cryptocurrency and do not dare to enter this asset class. So, uh, they're accompanied by financial advisors and everyone who has their investments. So, uh, we offer them the opportunity to accompany them and manage their money. This is done as part of a large distribution of their savings. Uh, on the other hand, we have crypto- crypto- native customers who have been buying cryptocurrency for years.

They have a large number of advantages. If they sell, they are taxed they are taxed , so they don't sell. But they are tired of suffering from position volatility. So they say, “Okay, I don’t want to do this anymore . Sometimes it becomes a full-time job for me .

So no, it's not mine anymore, it's my...That's not the reason I bought cryptocurrencies bought cryptocurrencies . Yes, and yes. So for me, there is a place for active management active management , not just buy and hold. Yes.

Well, everything you said, Aaron, is related to capital structure, right? Why do you think something is going wrong? This is a bad capital structure. We see this in the hedge fund world. You saw this during the global financial crisis.

You saw this in 2020. There is always a mismatch between investor liquidity, the structure of the instrument, and the underlying asset. My recommendation to anyone who wants to manage money for the long term is: don't start a hedge start a hedge fund, or at least not a traditional hedge not a traditional hedge fund with weekly or monthly liquidity, because the moment it all starts, the money will fly out, right or wrong." Sometimes you have to protect investors from their own stupidity. Yes, we went through this experiment ourselves a few times, where people came in and said, "Look, we should also develop a hedge fund strategy."

We look at this and say, "Well, what if people are always going to ask us for this?" This is at the peak of the market. Invariably, in 6 months they will regret it and want their money back. So we only looked at structures where we thought, "Well, how about locking up the money for 3-5 years, right?" Hmm, to protect investors from their own stupidity, on the one hand, but also as a business, you know, as a small, growing business, you need to protect yourself as well .

You need to invest in infrastructure and people. Hmm, yeah, and then people will say, “Oh, yeah, but I want, I want liquidity. I want to be able to get out of there." Well, listen, if you're even slightly skilled, you tell them you're going to turn a profit at the end of the year. This is, you know, you keep the principal amount for yourself, but you return the profits.

But I think it's too easy, you know, we all use the same lawyers in the Cayman Islands, and they all say, "Well and they all say, "Well , it's, you know, copy, paste, simple and convenient." Nobody's really thinking about how to structure these, uh, tools tools differently. And I think that's what , you know, to prepare for what's coming next, let's try to lock in capital for a little bit longer. Um, yes, if you misbehave, you should be fired, and those conditions should also be included in the foundation documents, which I don't see often. But, uh, you know, you need to have the right structure, and that's something I think is critically important that gets forgotten, so we go back to the venture part, where you have high returns and, uh, you have the security of the capital structure, knowing that the money will be there.

Yes, I think people need to take that with them and put it in their pocket before they create the next fund. Well, it seems that venture capitalists have it much easier than liquid hedge liquid hedge funds, because they don't have to send monthly reports. Well, there will still be a regular report , but, you know, you don't worry about the money going away next month. Good point. Going back to my original question, are there any other thoughts?

Yes, from a systematic, uh, strategy perspective, right? So, we use active strategies. The intrinsic value of the distributor is in finding niche strategies or a niche, er, niche trader. And, uh, we've always seen this hunt for a less crowded trade or a niche trade, or, you know, something that I wouldn't call insider trading, but something that's known to a smaller circle of traders, and they try to exploit that. But then, you know, once you go through those search criteria, uh, you look at, you know, you obviously lean towards riskier strategies in terms of infrastructure and the trade itself.

I mean, everyone is trading hyper-liquid assets now, but previously, decentralized exchanges (DEXs) were off-limits to institutional players. Now everyone is trying to experiment, at least with some part of the capital. But, uh, again, I think the breath of fresh air was the introduction of tokenized securities, and we saw a massive influx of volume precisely because of these strategies and the convergence of TradFi and traditional crypto traditional crypto platforms for liquidity. And this gave a lot of hope to hedge funds, which were the native cryptocurrency native cryptocurrency , which basically trades everything. And it's an interesting process to observe.

I mean, I I I I can, I can even add another, more curveball, without repeating what was said repeating what was said . Uh, if you think about it with the promises of 3-5 years when we get AGI, I think the market is going to be less and less predictable. For example, if we look at what happened today, for example, with the Federal Reserve, when, you know, we had higher rates, as you know, before that the goal was to beat inflation, to be more predictable, to help people fall. Now, with the increase in artificial intelligence trading, as you know, it will be less predictable. The people who embrace this technology will outpace everyone else, and there will be hyperscalers and people who will control more assets under management, and they will just mushroom, similar to what we're seeing with Open and Anthropic, their valuations are like trillion dollars, which was in Silicon Valley before, which was crazy to think about.

For example, a company that has been in existence for 5 years, 5 years or less, would be valued at a trillion dollars. Now I think something similar will happen with liquid funds. Those who outperform others and have, say, even annual audited results with incredibly sharp declines and very low drawdowns will be able to cash out the rest very quickly. What are some other thoughts on distributors? What do you mean?

If not, then we are slowly approaching the end. Hmm, we want to understand how we position ourselves for the future. What are the key themes for the next 12 months? Question one. Question two: has the bull market begun?

And the last question: where do you see Bitcoin at the end of 2027? I will start. Hmm, the bull market isn't over yet, or, excuse me, it hasn't stopped, right? The market is still growing compared to where we were 8 years ago. So I don't know what you're talking about.

Um, number one, number two: I would say in this environment we're still, you know, I'm just against shorting. Hmm, I just have to be very careful. I mean, on these very volatile products, you just stop-loss at some point. So as part of a trading strategy it might work, but as a long-term investor I would just not touch it. So, um, do your research, take long strides.

Going back to the beginning of the conversation, hmm, I'm just really excited to see all this consolidation happening in the industry. And a lot of big institutions, a lot of you here today, um, are buying up, um, you know, digital asset companies. Hmm. Hmm, and you know, there's a lot of great technology, a lot of it that hasn't been, um, created yet, but isn't really being used. And you know, this trend is just going to continue.

Hmm, it's secular, and it's long-term, you know. It doesn't matter what the price is. The only thing that matters is that more and more assets are appearing on the blockchain, and this is not going to stop anytime soon. Well, like I said, it's, um, sales time. So it won't take too long.

Uh, if you, uh, the big picture, uh, financial, uh, the asset management industry manages $140 trillion. Uh, we did the math, most people, uh, did it. If you add 6% to, uh, 6% of add 6% to, uh, 6% of cryptocurrencies to your allocation, you, uh , increase, uh, you improve your portfolio's exponential growth rate. So that means, uh , that brings us to, uh, the market capitalization of cryptocurrencies, about 8.6 trillion.

The market capitalization of cryptocurrencies today is 2.7 trillion. So this is a multiple of, uh, 3.6. I mean not just, uh mean not just, uh , Bitcoin, all cryptocurrencies.

So, uh cryptocurrencies. So, uh , there's a good window to buy it now. Uh buy it now. Uh , it's "buy and hold." And on the other hand, the good volatility that I mentioned is that, well, we have higher rates, which creates volatility, but we have good growth.

So, we will have more savings, and you need professionals to manage those savings. Yes, I would say the future is interesting. And we have so many competing topics right now. We have prediction markets, we have AI stocks that are really extracting a lot of liquidity from cryptocurrencies. But ultimately, I think cryptocurrency will become the rails for giant trade giant trade .

And this is where, you know, everything will go to another level, I hope. We're seeing regulatory changes that allow, I don't know, for example, retail in the US to participate in sort of global liquidity pools. So, like their Bitcoin base, they will allow it. So this will be a huge boost to the options markets. And those kinds of things, I think, will ultimately lead to more consolidation of global liquidity and more volume, more trade, more opportunities.

I am very positive. I like it. The same, very positive. I think I'll summarize again that banks will push tokenized deposits, which will bring in trillions of new dollars and bring a lot of trust. Perpetual futures will eventually be adopted in the United States, bringing several hundred billion dollars and new liquidity.

I agree that ultimately we are looking at a multi-trillion dollar market cap, which will allow us to have more capacity for liquid hedge liquid hedge funds. I am very optimistic about more tokenized shares, which will again bring new liquidity and more trust to this space and allow traditional asset managers to work effectively with more new managers. And of course, mergers and acquisitions, because come to think of it, Blackrock is n't going to open many of its own stores. It's easier for them to invest or buy someone else. Again, I don't know, going back to the forecast, what the price will be, but I do know that in 4-5 years the price of Bitcoin will at least double compared to today.

So this is not investment advice, but you know what to do. Thank you, Konstantin, for at least answering my question, because everyone else was avoiding my price predictions, but hold on, hold on. Hmm, a very optimistic forecast. Thank you all, and that's the end.