The crypto industry is fairly unique in its history, philosophies, and market structures. However, if there is one industry that a lot of the very short-term behavior of crypto can be compared to, that’s Forex. Don’t mistake this for the long-term though – I don’t know of any traditional currency that gains a 100% in a day like crypto can. However, if you’re looking at the very short-term, say minute-by-minute trading action, the charts resemble the Forex market in many ways, especially the leveraged Forex market.
Forex to Crypto Transition
For investors in the crypto asset class then, is there an advantage to have mastered Forex? That’s what the team at Countinghouse is betting on, with their new fund that trades exclusively in crypto using investor money.
Like any project, especially one that trades in the crypto markets, we’d add a risk premium that can go both ways. In a bull market, the returns can be amplified, and in a bear market, the returns can be decimated more than the market. Why? Because the fund still needs to pay fixed costs even if the money in the bank has gone down like 80% in a full cyrpto bear market.
So, it’s a double edged sword. If you’re in crypto and think the markets are not exciting enough, the funds generally make sense. Countinghouse’s strategy is a little different than other funds though.
Strategy and Fundraising
On the strategy side, the Countinghouse fund isn’t doing the traditional ICO investing like many other funds do. Sure, it allocates 10% of the fund for this purpose, but that’s not the majority by any means. Instead, the majority of the money is allocated to algorithmic trading and arbitrage strategies.
What’s the advantage of this? For starters, the team has expertise in Forex. The Forex markets can be quite choppy like crypto especially when you add in leverage. The team is hoping to translate that expertise from Forex to crypto.
Then, crypto is a unique beast. We all know how the market structure is inefficient. During the recent bull run you might remember how the price on Korean exchanges was consistently higher than others. The Clearinghouse team realizes this, and is trying to take advantage of it. Sometimes, these arbitrage funds can make a lot of sense.
For investors then, the expectation is to make profits in both bull and bear markets. Arbitrage, for example, should work in both types of markets. In fact, the strategy should perform well as long as there is volatility in the markets, and we know how that works in crypto!
Clearinghouse also has a different strategy to raise investor money than other crypto hedge funds. It is doing a straightforward ICO for this purpose. Investors give money to the team, and get their tokens. These are security tokens representing ownership in the fund managed by Clearinghouse. You get the benefits of more liquid markets. You also pay less minimum fees, because of granular divisibility.
At the end of the day, you’re making a bet on the team to deliver, so make sure to do your research. Check out the website and whitepaper as the starting point. Remember, investing in tokens is risky business and never invest more than you’re willing and able to lose completely.