GSA Capital, the $2.6 billion quant hedge fund, joins Steve Cohen, and Alan Howard in a bid to profit from the market’s well-known volatility and inefficiencies. That is, assuming Chris Taylor, an American football player, and his fellow fast-money speculators survive the next crash unscathed.
The 16-year-old fund employs the same systematic trading techniques that enabled it to profit in the traditional stock, derivatives, and currency markets. Taylor stated that the General Services Administration (GSA) began trading crypto assets formally in August.
A mathematician from the University of Cambridge will not identify the size of the capital commitments but says they are a modest percentage of the firm’s International Fund, with the potential to grow if performance is vital.
Penetrating a volatile market
The GSA is making a smart move given that the bull market is reaping easy dividends for market-neutral quant strategies. Bitcoin has risen over 40% this month to new highs following the launch of an exchange-traded fund that tracks bitcoin futures.
According to Bybt figures, the funding rate for long positions in Bitcoin futures – a widespread bull cycle trade — has reverted to pre-May levels. GSA ultimately leverages the discrepancy by shorting futures and longing spots, a classic arbitrage move that provides the crypto market with the closest thing to a free lunch.
Exchanges and prime brokers are not interchangeable. Platforms may liquidate positions at any time, so GSA must provide further collateral.
Risks and securities
Even winning wagers, such as Taylor’s Dogecoin position, can be closed if exchange operators attempt to absorb other traders’ negative balances during a market meltdown, as Taylor discovered earlier this year.
Due to the market’s reputation for hacking, many investors keep their tokens cold. Hedge funds must still send them to trading exchanges. Taylor, who is adjusting to his new job, believes balancing liquidity and security is now impossible.
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