RIGA, Latvia—Michiel Lescrauwaet, co-founder of bitcoin investment fund Adamant Capital, recently laid out the firm’s investment strategy, and five approaches that can outperform bitcoin, at the Baltic Honeybadger Bitcoin conference.
Adamant calls itself a “bitcoin alpha fund,” meaning that it tries to beat bitcoin’s performance. It also argues that bitcoin should be used as a benchmark for the whole crypto industry, as opposed to frameworks borrowed from traditional finance that are currently used by most crypto asset fund managers.
“Effective Bitcoin investment strategies depend on the maturity of the market,” said Lescrauwaet, adding that we’ve moved on from the initial “discovery phase” to the “infrastructure phase.” (See chart below.) Locking up bitcoin in bitcoin’s scaling solution, the Lightning Network, still involves some technical risks, and doesn’t make sense—yet, he said.
Evolution of bitcoin investment. SOURCE: Adamant Capital
Also key, he said, are the aims, experience and appetite for risk of the individual investor. He referred to various frameworks the firm had established comparing risk and reward.
Investment strategies vs. hodling. SOURCE: Adamant Capital
The firm also provides investors with a handy flowchart, to help then decide which strategy’s right for them.
Strategies flowchart. SOURCE: Adamant Capital
Lescrauwaet then proceeded to drill down into some of the strategies investors should consider employing today.
Avoid bitcoin lending
Lescrauwaet said that lending out one’s Bitcoin for a year can command a return of around 2.5% in a bull market. That’s because there’s not a lot of demand for bitcoin, “whereas in a bear market, when people want to go short, it’s about 6%, going by 2018 figures.” Adamant, he said, doesn’t believe it’s a very good trade, for several reasons. Counterparty risk is still a big factor, and there are also tax implications to consider, especially…