Crypto Fund Managers Now Use Crypto Exchange Native Tokens to Maximize Profit

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In Brief
  • Crypto fund managers have revealed that native tokens of crypto exchanges can act as defensive assets.

  • Some of the best performing digital assets of this year like FTT, belongs to a crypto exchange.

  • With the market's increasing volatility, especially amidst global tensions and government policies, crypto investors are learning the hard way not to bet on Bitcoin alone.

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A dip in the crypto market usually comes with many crypto enthusiasts urging people “to buy the dip.” However, recent indications show that crypto fund managers now purchase native tokens of crypto exchanges to support their market position.

According to a Bloomberg report, traders are more likely to buy other tokens than Bitcoin during a massive crash of the industry.

This shows that investors in the space now adopt a strategy common to traditional financial investors to deal with the intrinsic, volatile nature of the crypto industry.

Jeff Dorman, the chief investment officer of digital asset fund manager, Arca, stated that exchange tokens are defensive assets. He continued that while many people tend to think of Bitcoin as a defensive asset, it’s exchange tokens with real cash flows, revenues, and amortization that possess this quality.

This appears to be true so far, given the massive returns Arca had on the sale of its Leo holdings. In 2019, the firm bought $3 million worth of the utility token of Bitfinex, Unus Sed Leo for $1 per token. 

It later sold them for a huge profit of around $5.50 per token. The portfolio manager, Hassan Bassiri, conceded that this was one of the firm’s best risk and reward investments.

Exchange tokens see huge growth

Dorman further pointed out that exchange tokens show resilience in a bearish market. This is so because exchanges are the ones who actually benefit from volatility. In this case, the trading volume of their platform tends to increase, which raises their revenue and invariably helps the performance of their native token.

FTX token, FTT, is one of the few crypto assets that has lived up to this principle so far. It is one of the few tokens that has performed considerably better than other digital assets this year. This performance correlates with that of the parent company that has been one of the fastest-growing companies in the crypto space.

BNB, the native token of Binance, has also recorded a level of growth in its price and the number of its holders to rival more illustrious assets like Ethereum. In fact, the exchange stated that it was renaming its Binance Smart Chain ecosystem because of the level of growth it has recorded outside of its parent company.

With the market’s increasing volatility, especially amidst global tensions and government policies, crypto investors are learning the hard way not to bet on Bitcoin alone. As a result, exchange tokens have become a sort of haven for those seeking defensive assets.

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Oluwapelumi believes Bitcoin and blockchain technology have the potential to change the world for the better. He is an avid reader and began writing about crypto in 2020.

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