Building a Crypto Hedge Fund

in trading •  3 years ago  (edited)

Running a hedge fund is mainly about allocating capital in the most efficient way. Let's say we have 4 traders of equal ability, one manages a 1k portfolio, one a 100k portfolio, one a 1m portfolio and the other a 10m+ portfolio:

The amateur

The trader with the 1k account will most likely make the best % returns, he can take advantage of almost every arbitrage opportunity, become a low volume shitcoin master and generally have significantly more flexibility than any of the others.

The semi-pro

The 100k trader will have a little less flexibility. He won't be able to trade the really low cap coins because it won't be worth it. He'll have a decent advantage in ICO's if researched properly with a few trades here and there. Still pretty flexible with some incredible returns.

The full-time crypto trader

The 1m trader most likely will not indulge in shitcoins. Only the best arbitrage opportunities will be worth his time. At this level arbitrage will most likely be automated with algorithims as the profits will be relatively small Vs the portfolio size.

Certain presale icos might be maxed out at 50k, so there's a barrier there. This trader would need to hold a certain % long term, with fundamental analysis. Maybe some form of crypto ETF.

The difference between a 100k trader and a 1m trader is the difference between a part time and full time job.

The hedge fund manager

Finally we arrive at the true market wizard. The hedge fund manager. Someone that manages 10m+. Someone with the same skillset managing 10m will never be able to compete with someone managing 1k. But how can they bridge the gap?

In my head this comes from categories of trades and allocating capital efficiency. It also means a team of people to get the same excess returns.

Opportunities to flip icos are restricted. Getting in and out of positions is not a one click operation, they take time. You have to hold more and have more fundamental trades.

Not to mention the legal framework behind managing other people's money, the team you need around you and tax implications.


So given everything, how do you build a crypto hedge fund?... Or more aptly put how do you maximise the return from 10m+ in assets?

Firstly you need a team to manage client relations. Support, social media. Someone technical, a CTO that can manage security and client funds. A ragtag group of diverse traders to manage the capital.

It becomes a whole different game. A fun game, who's down?

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I have hodled and diversified as far back as I can remember and did better than my friends who are full time traders. I cash out when I see major red flags that can prove even more catastrophic. (e.g remember when I called the Bancor shadyness after the ico and cashed 1/3 of all my ETH positions equally- including BTC). That was pretty much a tipping point for all the entire market. (at least according to me. I know correlation is not causation and I might have been lucky).

My plan is major exits when I see red flags and then when there is blood everywhere I bulk up on everything between 20-30% drop. everything that drops more than 50% i never touch it ever again.

It's been tough for traders to beat the market, I mainly HODL. With a little more time and focus on crypto rather than trading commodities, the markets in crypto are significantly less competitive to make money in.

Good call on ETH, I doubt it was due to luck, there was just a point where it got ridiculous and you managed to pick up on it.

Why do you need to have someone to do support and social media? Are they going to shill coins because that's illegal...?

If you're managing other peoples money you need to have someone dealing with clients questions

I have thought about all of these exact things as a trader myself :P

I think that the first thing to build a crypto hedge fund is to be a solid trader, move from 1k to 1-2M, THEN raise few funds, THEN get the support and tech, THEN raise big... If you don't get reputation in the market nobody will give you money. Majority of traders start small, and as you pointed out the mentality is really different form size to size, the owner of the fund should be at the highest stage in order to convince people to invest.

What you guys think about... It is not the same as this but along with iconomi/ Numeraire?? I is the closest coin the concept of investing in multiple cryptos ...

MASS Tokens are the first of its kind and will be the standard in how people invest in cryptocurrencies.
MASS Tokens allow token holders the ability to stake securely in multiple currencies and masternodes
simultaneously, while receiving block rewards automatically. Due to their unique situation, MASS Tokens
hold twice the value of typical ERC20 tokens. Not only can they be traded on various exchanges around
the world, but the tokens themselves lead to a large pool of funds receiving block rewards on a continuous
basis, which will drive their value on exchanges even further.

Good idea - but I dont trust the team

Interesting article!! What would be your targeted investment universe? would the HF only invest in other assets from the crypto world, or would the funds be used to also trade real world assets like

  • stocks
  • bonds
  • options
  • etc... ?

Entirely cypto

If you are hedge fund manager you will trade top 10 coins with high market cap, but i don't know any legal hedge company to invest in crypto for now, if any one know with proof just let me a message please.

I like to research altcoins that are newer, and can grow a lot, and that have a really cool purpose. I also post lots of details about them so people

I'll be sure to check out your blog

ragtag trader here :)



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I'm in PM me or better yet come to our meetup next week :)

Hehe, a little too far for me :P Will you guys be coming to Lisbon?

Fo Sho!


Yeah see you in Lisbon :D

good thinking

  ·  3 years ago Reveal Comment

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The platform is already working and making a profit :)

This is a free social network) If my post in your opinion here is strongly not appropriate. Forgive me) You can lower his rating! :) And I'll have it in mind :)