- In less than four months, crypto hedge fund BKCoin Capital has doubled its assets to $130 million.
- Founders Carlos Betancourt and Kevin Kang told Insider about the firm’s 5 trading strategies.
- They also shared an altcoin whose recent upgrade has unlocked tremendous demand and upside.
In just over three years, Carlos Betancourt and Kevin Kang — a pair of former Wall Street traders — have grown their crypto hedge fund to an 11-person operation overseeing $130 million in assets under management.
But the journey hasn’t always been easy, the founders of BKCoin Capital told Insider in an interview at the Chicago Trading Show.
For starters, it took them more than a year to prepare for the fund launch, which turned out to be an arduous process due to the lack of crypto custodians that were ready to service active hedge fund managers back then.
“They had cold storage and it would take 24 hours for you to get your asset so you can trade,” Betancourt recalled. “That doesn’t work for an active manager that sees an arbitrage opportunity and needs to act quickly.”
Like many crypto traders, Kang and Betancourt were drawn into crypto after stumbling upon tremendous arbitrage opportunities, which typically refer to buying crypto on one exchange and selling it for a higher price on another exchange.
“In the traditional world, if you have a low-teens or high single-digit return a year, that’s a pretty good year,” Kang said. “Whereas in crypto, we are looking at 10% to 50% return per trade, so compounded over the course of the year, we are seeing just too good of an opportunity to pass.”
Kang didn’t miss the other side of the coin either. When he first started trading crypto in 2016 and 2017, it seemed like he could do no wrong even with a simple buy-and-hold approach. However, when the
descended on crypto in 2018, many investors were wiped out due to the sudden drawdowns and liquidations of leveraged trades.
5 flavors of systematic crypto trading strategies
As a result, they decided to launch with a market-neutral strategy to give institutional investors exposure to the still-nascent asset class but with much less volatility. The systematic strategy utilizes an in-house proprietary algorithm to identify and exploit arbitrage opportunities.
As the crypto market matures, arbitrage opportunities are few and far between, but Kang still finds them in the derivatives market and offshore exchanges. The trick, he said, is to always stay on top of new launches, whether it’d be new tokens or altcoins, new investment instruments or products, and look for market dislocation there.
“Obviously, there’s going to be no strategy where we are the only ones that know about it. There are smarter people out there who can figure it out,” Kang said. “But in terms of…