Despite a staggering number of cryptocurrencies in circulation, 99.99% of crypto tokens will eventually become worthless, according to Chris Solarz, Chief Investment Officer at Amitis Capital. However, he believes the current environment presents a “golden age” for investing in crypto hedge funds, where old-school strategies from traditional finance (TradFi) are finding new life.Key Takeaways:Crypto hedge funds are still “10x less competitive” than their TradFi counterparts, creating outsized opportunities for skilled managers.99.99% of tokens are likely to go to zero, with only around 100 tokens worth considering for institutional investment.Crypto hedge funds manage $88B, a fraction compared to TradFi’s $5T — suggesting plenty of room for growth.Old trading strategies that stopped working in TradFi over a decade ago are working again in crypto, according to Solarz.“Shooting Fish in a Barrel” in an Underdeveloped SectorSolarz likened the current crypto hedge fund landscape to the early days of TradFi hedge funds in the 1990s, calling it an “alignment of the stars” for fund-of-fund allocators. Back then, there were just 127 hedge funds managing $39B; today, there are over 10,000 funds with $5T AUM. In contrast, crypto is still an emerging arena where experienced allocators can easily identify winners.But despite the opportunity, Solarz says 95% of crypto fund managers aren’t ready: “They’re just buying BTC, ETH, and SOL and charging 20% for it — that’s not value-add.”The End of Altcoin SeasonsSolarz warned that the days of “everything pumps” altcoin seasons are over. With over 40 million tokens in existence and massive upcoming token unlocks, altcoin markets face a supply overhang. He estimates $300 billion in new capital will be needed over the next three years just to maintain current prices — yet retail has mostly shifted to memecoins.“There’s only about 100 tokens worth talking about,” Solarz said, expecting most others to go to zero.Profitable Strategies: Market-Neutral WinsOf the 14 funds Amitis Capital has allocated to so far:3 are venture capital4 are liquid directional7 are market-neutralMarket-neutral strategies, which aim to generate returns regardless of market direction, remain highly profitable. Examples include:Arbitrage on regional pricing disparities, like during the South Korean political crisis.Perpetual funding rate arbitrage, where funds short futures while holding spot, earning up to 30% annualized on the spread.These “boring but consistent” strategies are now core to institutions seeking yield in crypto.Institutional Focus vs. Family Office AggressionSolarz noted the split in priorities:Institutions focus on capital preservation.Family offices seek aggressive compounding.Despite a preference for liquid strategies, Amitis remains open to high-quality VC opportunities — but only with rigorous due diligence and a high bar.Outlook: Crypto Hedge Funds Will Shine, But Most Tokens Will NotSolarz concludes that crypto hedge funds have a window of opportunity before the space becomes saturated and commoditized like TradFi. But investors must be discerning, as most tokens are destined for zero, and the next altcoin boom isn’t coming anytime soon.“Eventually, no one will talk about crypto companies — every company will just be a crypto company,” Solarz predicted, noting Bitcoin may match gold’s market cap within the next decade.Bottom Line: While the token landscape is bloated with unsustainable projects, crypto hedge funds are poised to deliver alpha for smart allocators. But the clock is ticking, and only disciplined managers — with true process and risk controls — will thrive, according to CoinDesk.
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