Key Takeaways
- • Chris Solarz, chief investment officer of digital assets at Amitis Capital, told CoinDesk that there has never been a better time to allocate to crypto hedge funds, calling it the "golden age" of crypto hedge fund investing.
- • Solarz estimates the crypto ecosystem holds roughly 40 million tokens and expects 99.99% of them to eventually go to zero, arguing only about 100 are worth discussing.
- • Solarz estimates crypto has roughly 1,650 hedge funds managing $88 billion, which he says is about 10 times less competitive than traditional markets, letting managers revive strategies that were commoditized in TradFi.
- • Amitis has allocated to 14 funds: three venture funds, four liquid directional funds and seven liquid market neutral funds, with a preference for liquid market neutral strategies.
- • Solarz argues the top 100 tokens face massive scheduled unlocks requiring at least $300 billion of new inflows over three years to sustain current prices, against an estimated $30 billion liquid token market for hedge funds.
Summary
Chris Solarz, chief investment officer of digital assets at Amitis Capital, a crypto-focused fund of funds, told CoinDesk that there has never been a better time to allocate to crypto hedge funds. Solarz, who previously oversaw nearly $8 billion in allocations at Cliffwater, described the current environment as the "golden age" of crypto hedge fund investing, citing favorable market structure and a scarcity of skilled managers.
Solarz argued that crypto hedge funds can still run strategies that TradFi managers abandoned decades ago. He compared the sector to the early hedge fund industry, which had 127 funds managing roughly $39 billion in 1990, versus more than 10,000 funds managing about $5 trillion by 2024. By his estimate, the crypto sector's roughly 1,650 hedge funds managing $88 billion are about ten times less competitive than traditional markets. He was critical of many managers, saying that of 20 he meets, "19 out of 20 don't deserve to be running money," and that paying a 20% performance fee for exposure to bitcoin, ether or solana that investors could access directly or through an ETF is not justified.
Solarz divides his allocation universe into venture funds, liquid directional funds and liquid market neutral funds. For directional funds, he prioritizes investment process, repeatability and risk management over stated theses. He said the era of altcoin seasons, when most cryptocurrencies rise together, is over. Of the roughly 40 million tokens in the ecosystem, he expects 99.99% to eventually go to zero and said only about 100 are worth discussing. He also projected that the market needs at least $300 billion of new inflows over the next three years to absorb token unlocks scheduled for the top 100 tokens, while the liquid token market accessible to hedge funds is about $30 billion and retail traders have shifted to memecoins.
Amitis has allocated to 14 funds: three venture, four liquid directional and seven liquid market neutral. Solarz said venture capital has drawn about five times more money than liquid crypto funds historically, partly because venture marks are easier to conceal from investment committees. He said market neutral strategies remain profitable, citing arbitrage opportunities during the December South Korean martial law episode and basis and funding-rate trades on perpetual contracts, which can reach 30% annualized, as well as similar strategies on spot bitcoin ETFs and CME bitcoin futures. He described these returns as double-digit and consistent.
Solarz argued that crypto hedge funds can still run strategies that TradFi managers abandoned decades ago. He compared the sector to the early hedge fund industry, which had 127 funds managing roughly $39 billion in 1990, versus more than 10,000 funds managing about $5 trillion by 2024. By his estimate, the crypto sector's roughly 1,650 hedge funds managing $88 billion are about ten times less competitive than traditional markets. He was critical of many managers, saying that of 20 he meets, "19 out of 20 don't deserve to be running money," and that paying a 20% performance fee for exposure to bitcoin, ether or solana that investors could access directly or through an ETF is not justified.
Solarz divides his allocation universe into venture funds, liquid directional funds and liquid market neutral funds. For directional funds, he prioritizes investment process, repeatability and risk management over stated theses. He said the era of altcoin seasons, when most cryptocurrencies rise together, is over. Of the roughly 40 million tokens in the ecosystem, he expects 99.99% to eventually go to zero and said only about 100 are worth discussing. He also projected that the market needs at least $300 billion of new inflows over the next three years to absorb token unlocks scheduled for the top 100 tokens, while the liquid token market accessible to hedge funds is about $30 billion and retail traders have shifted to memecoins.
Amitis has allocated to 14 funds: three venture, four liquid directional and seven liquid market neutral. Solarz said venture capital has drawn about five times more money than liquid crypto funds historically, partly because venture marks are easier to conceal from investment committees. He said market neutral strategies remain profitable, citing arbitrage opportunities during the December South Korean martial law episode and basis and funding-rate trades on perpetual contracts, which can reach 30% annualized, as well as similar strategies on spot bitcoin ETFs and CME bitcoin futures. He described these returns as double-digit and consistent.
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