Investors who simply bought and held their crypto assets last year took major losses, but others who played the volatility in the market saw substantial gains. The gains were generally made by avoiding direct ownership of cryptocurrency assets and investing instead in hedge funds designed to move with the market.
Regardless of last year’s numbers, many are hoping that 2019 will bring recovery to the price of Bitcoin (BTC) and other cryptocurrencies. What is more, the volatility play may not be the best, given the recent stability the market has shown.
Given all options for investors, the risk of failure is very real, and good advice is at a premium. BeInCrypto sat down with BitBull Capital CEO Joe DiPasquale to get his take on what happened last year, and what to expect going forward.
What do you see as the biggest influences in the crypto investment market over the past year?
There is a marked return towards conventional venture capital investments, with most ICOs failing and investors realizing that whitepapers alone don’t make projects. Now, new blockchain ventures are being funded for equity as well as tokens, milestone-based targets, preferential liquidity, board seats, etc. These higher standards on the part of investors are a healthy move for the market.
Explain the issue of volatility and profitability for investors. In other words, is there a way to make volatility work for you?
When investing in crypto, you can choose ‘directional,’ passive strategies such as buying an index or a single asset like Bitcoin, or you can invest in actively-managed investments, including ‘market-neutral’ strategies that specifically aim to profit off of volatility.
Our crypto hedge fund, for example, returned 29 percent in the last two months of 2018, vs Bitcoin at -41 percent — a 70 percent difference. Here is an outline of some strategies that crypto hedge funds may employ:
Market-Neutral and Relative Value:
- Volatility-weighted positions, leveraging crypto’s unique volatility
- Long/Short positions
- Equity (its fund of funds includes equity in Coinbase, mining companies, and blockchain technology ventures, among others)
- Event-driven, catalyst-driven, and special situations
Generally, for skilled market-neutral traders, the more volatile, the higher the return. If you are a long-only fund or investment, or a passive investor, volatility does not necessarily work for you. Our research has shown that in the crypto asset class, unlike in traditional stocks and bonds, active managers consistently outperform an index.
Moving into 2019, how do you see the crypto market changing? What factors will have the most impact on the market?
We believe there will be less volatility and more stability this year and new market trends will emerge in a more ‘trusted environment’ with the launch of top tier services by major institutions such as Nasdaq, ICE/NYSE, and Fidelity.
Given the ICO collapse in 2018, do you see ICOs as a viable investment space going forward?
ICOs have to change, and we are already witnessing a difference in investment trends towards equity and tokens (or coins) rather than just tokens.
Blockchain ventures are encouraged to make goal-based projections and receive funding in stages, and with the SEC coming down on individual ICOs for not registering correctly, we are also expecting a shift towards regulated security token offerings (STOs) this year.
From a strategic perspective, do you see 2019 shaping up to be a year for holding crypto assets, or moving into hedge fund positions?
Hedge fund positions are generally more risk-averse than holding crypto assets. In 2018, our research showed that the average crypto hedge fund provided some coverage from the losses of Bitcoin or a Crypto Index.
Because the volatility has decreased in 2019, and because we are at what BitBull believes is a major buy point — 2019 is a year for holding crypto assets. Also, we now have some reliable custody services, such as Coinbase, and others which are underway from the likes of Fidelity, for example, meaning 2019 should generally be a safer year for crypto assets.Because the volatility has decreased in 2019, and because we are at what BitBull believes is a major buy point, 2019 should be a year for holding crypto assets. Click To Tweet
Last but not least, even though it is hard to say, would you be willing to tell us your prediction on where you see the price of Bitcoin at the end of the year?
Our perspective is generally more cautious than others, but it’s how we made positive returns in 2018; we focused on trading the volatility. While others predict Bitcoin to hit its previous high of almost $20,000 by the end of the year, vs the $3,500 it is today; we see it as hitting $5,000, and instead hope to aim for the same 470 percent return in 2019 via short-term volatility strategies like the ones mentioned above.
Do you think DiPasquale is right about 2019 being less volatile? Is Bitcoin at a buy point for maximum profitability? Let us know your thoughts in the comments below!
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