No Free Lunch Fund Q4/2024 Update

Q4/ 2024 The Numbers Game:

• No Free Lunch Fund: +37.49%
• Bitcoin: +46.17%
• Ethereum: +28.32%

2024 was a strong year for our fund, delivering a 76.22% return. While Bitcoin outperformed us by 37%, we still surpassed Ethereum by more than 65%. It’s a solid performance — though not extraordinary — but let’s be candid, outperforming Bitcoin is no easy achievement (something often overlooked by many fund managers). We recognize that while more investors are becoming open to crypto, many still prefer exposure to Bitcoin alone. To address this, we’re introducing a new share class, which will be covered in more detail later in this article.

Overall the last quarter of 2024 was a whirlwind of volatility and major events. With Trump’s election victory, crypto markets soared — Bitcoin leading the charge like it had just won the presidency itself. Buckle up — there’s a lot to unpack.

Ethereum: A Reality Check

When Trump won, I thought to myself, “This is Ethereum’s moment! With regulatory clarity for DeFi in the U.S., ETH should finally get its time to shine.” Forget the Ether ETF launch — it wasn’t ideal, but now there’s another reason to take Ethereum seriously. Trump’s win is bullish for DeFi, and DeFi runs on Ethereum. Just when it seemed like ETH might get its moment, MicroStrategy’s Bitcoin buying spree stole the spotlight, drawing liquidity and attention away from everything else.

The MicroStrategy Reflexivity Loop

MicroStrategy (MSTR) has become the poster child of reflexivity in crypto. In December, the company raised $2.6 billion (with the option to increase it to $3 billion) by issuing zero-coupon convertible senior notes. In simpler terms:

• No interest payments: These bonds don’t pay interest. Instead, investors make money by converting them into stock at a premium.
• Conversion price: Each $1,000 bond can be converted into 1.4872 shares, setting the effective price at $672.40 — a 55% premium over MSTR’s trading price at the time.

And here’s where the reflexivity kicks in: Investors gave MicroStrategy “free” money → MicroStrategy bought Bitcoin → Bitcoin price went up → MSTR stock price soared → Investors piled in again. Below you can see what this did to MSTR price.

It was a spectacle. Watching investors willingly pay such a premium was like watching someone FOMO into an NFT collection at the peak of the last bull market. And as always with Bitcoin, risks feel distant — investors just assume everything will “work itself out.” The worst-case scenario? MicroStrategy can’t meet its debt obligations and is forced to sell Bitcoin, triggering a cascading sell-off. But thats in year 2027 so nobody really cares about it now.

Bitcoin: All Hail the King

I firmly believe that Bitcoin stands apart from the rest of the crypto market. There’s Bitcoin, and then there’s everything else. Bitcoin’s simplicity — “digital gold” for the 21st century — makes it the clear winner in the store of value category. Its cult-like following, combined with deep liqidity creates an unbeatable risk-reward profile, which in turn makes it the strongest asset in crypto by far. When new institutions come, it is pretty clear what are they going to buy.

Because we trully believe Bitcoin stands out on its own we decided to create a new share class in our fund, that will be solely focused on the King. We have been running our options strategy for more than 2 years and on average our yield was 30%.

Unfortunately we have reallocated most of our profits into other assets that didn’t perform as well — dampening overall fund returns. This new share class fixes this. It is for those who believe in Bitcoin above all else. As we are confident in our options strategy we will take only performance fee from our profits and we will take no fee from price appreciation. New share class highlight below:

• Management fee: 0%
• Performance Fee: 33%
• Lock up: No
• Valuations: Quarterly

The Solana Trade: More Than Just Memecoins?

Outside of Bitcoin, Solana has been the Layer 1 trade of this cycle — driven largely by memecoins. This is a sector we’ve consciously avoided, as we have no edge in trading it. However, what is becoming increasingly interesting is DeFi on Solana. Memecoins create an absurd amount of fees, which is something we can work with. Our strength lies in yield generation, and we are confident in achieving 20%+ yields on SOL using DeFi strategies as options market is not fully developed yet.

Upcoming token unlocks in February and March could create significant buying opportunities. My gut feeling? The unlocks will be a non-event — those who want exposure are already positioned, and those who wanted to hedge have already done so. But one should never overestimate their ability to predict the future. We will gradualy increase or Sol holdings from current 5% to 10% during Q1 2025.

The Rise of Stablecoin Yields

One of the most interesting developments in 2024 was the evolution of stablecoin yields, with Pendle Finance at the forefront. Pendle has carved out a strong niche by appealing to both speculators and risk-averse investors because it offered something for both sides:

• Principal Token (PT): Provides a fixed yield but excludes additional rewards.
• Yield Token (YT): Captures variable yields, airdrops, and incentives, but its value gradually trends to zero.

Essentially, PT holders lock in predictable returns, while YT holders speculate on future profits. While this model isn’t new in traditional finance, it’s novel in crypto — creating a strong moat for Pendle. With proper risk management, achieving 25% yield with minimal volatility was possible in 2024, making stablecoin yield strategies an attractive opportunity.

Beyond Pendle, there are now multiple ways to generate stable, low-risk yield, which is why we’re launching our third share class: Neutral. This is a personal milestone for me — our fund originally started with delta-neutral and stablecoin strategies, so in a way, this feels like a return to our roots. While not exactly “coming home,” I have always believed in a crypto-native savings account where investors can earn substantial yield with limited amount of risk. Highlights of the Neutral class below:

• Management fee: 2%
• Performance Fee: 20%
• Lock up: No
• Valuations: Monthly

A strong indicator of a bull market are stablecoin yields. To put it bluntly: when speculation is high, yields are easy to secure. When the market contracts, even a 10% yield feels impossible. I firmly believe 2025 and 2026 will be great years for these strategies, and in hindsight, I wish we had started sooner.

Final Thoughts

I see 2024 as a pivotal year for crypto. The approval of the BTC and ETH ETF marked an important step, potentially opening the door for broader institutional adoption. But the real game-changer? Trump’s victory. His administration is likely to bring a political shift that could remove long-standing uncertainties and provide clarity. With clearer regulations, builders will finally have the confidence to innovate. One thing remains clear:

Crypto keeps going, and we are glad you are here with us.