Many crypto hedge funds were launched in the past 2 years because of a significant interest growth in cryptocurrencies. While some of these funds include experienced teams coming from other hedge funds, many of them were actually setup to make a quick profit during the hype.

In this article we will show why most so called crypto hedge funds are not actually hedge funds, but just passive investors in a basket of cryptocurrencies, in a way similar to mutual funds. Despite this, many of them still charge the typical 2/20 management and performance fees typical in the hedge fund world…

Many companies in 2017 and 2018 decided to raise capital through an ICO by issuing tokens in exchange of cryptocurrencies like Bitcoin or Ethereum. We find that, while these firms managed to raise billions of dollars in this period, they didn’t manage their crypto holdings price risk, losing on average around 80% of the entire amount raised with the ICO. As a consequence, existing and new ICO companies should start adopting a proper ICO treasury management and crypto hedging program. …

Many companies in 2017 and 2018 decided to raise capital through an Initial Coin Offering (ICO). While the process seemed very promising at the beginning, it also showed its limitations around the end of 2018. In fact, many ICO’s were in fact scams, while other failed to deliver the promises towards their investors. In this research paper we analyze the ICO market from 2015 until present. The first section gives an overview of the ICO market. The second section analyzes more in detail the evolution of the ICO capital raising process over time, while the third section analyzes the main…

During the past 2 years many crypto index funds emerged as a result of the increased interest in the crypto market. These products offer to their investors a basket of cryptocurrencies under the promise of higher risk-adjusted returns due to portfolio diversification.

In this research article we show how this is actually far from the truth. We find in fact that cryptocurrencies are highly correlated, offering no portfolio diversification benefit by investing in a basket of them. In particular, we find that the performance of Bitcoin and an equal weighted or notional weighted crypto basket portfolio is essentially the same…

Crypto market cap compared to traditional asset classes

Executive Summary

This article analyzes the cryptocurrency market capitalization for the top 20 cryptocurrencies. In particular, it shows the composition of market cap by cryptocurrency, how it evolved over time, and how it compares to traditional asset classes like stocks and bonds. The research finds the following:

  • Growth in crypto market cap: cryptocurrencies have experienced around 100x growth in the past 6 years.
  • Loss of dominance by Bitcoin: while Bitcoin constituted more than 90% of crypto market cap in 2013, today it constitutes around 50%.
  • Cryptocurrencies have a very small market cap compared to other asset classes: Bitcoin and cryptocurrencies have a…

Executive Summary

Recently there has been much development and interest in machine learning, with the most promising results in speech and image recognition. This research paper analyzes the performance of a deep learning method, long short-term memory neural networks (LSTM’s), applied to the US stock market as represented by the S&P 500. The paper shows that, while this technique may have had good success in other fields like speech recognition, it does not perform as well when applied to financial data. …

Executive Summary

This research article analyzes the performance of a backtested systematic global macro investment strategy investing in publicly traded securities across the world. The strategy invests in all asset classes, including Equity, Fixed Income, Commodity, Currencies, and Volatility. The strategy performance is compared to a traditional equity portfolio, represented by the S&P 500, and to a 60/40 portfolio invested in both equities and bonds.

The article is structured as follows. The first section analyzes the performance of equities as represented by the S&P 500. The second section analyzes the performance of a 60/40 portfolio, frequently used as a benchmark for institutional…

Executive Summary

This research paper analyses the performance of a backtested systematic long/short crypto investment strategy applied to a basket of top 14 cryptocurrencies by traded volume. In particular, it shows the superior performance of this strategy on both risk and returns compared to a passive buy-and-hold investment in Bitcoin or a crypto basket, which in contrary experience big and long drawdowns. It also highlights that it is not advisable invest in crypto basket funds, since their performance is very similar to a passive investment in Bitcoin.

This research is structured as follows. The first section outlines the characteristics of cryptocurrencies from…

On December 7, 2018 Bluesky Capital was invited at the Equities
Leaders Summit at the Trump National Doral Miami to discuss the adoption of cryptocurrencies as a new tradable asset class from equity investors. The following key takeaways emerged:

• There are still too many risks for institutional investors to enter in the crypto space, including regulatory, reputational, custody, and counterparty risks.

• Cryptocurrencies as an uncorrelated asset class provide benefits to equity or other investors in terms of portfolio diversification

Crypto is a highly volatile asset class, creating opportunities for hedge funds that employ trend-following / CTA strategies

Bluesky Capital

Quantitative investment manager investing globally in all asset classes on behalf of individual and institutional investors. www.blueskycapitalmanagement.com

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