London-based Man Group, the world’s largest hedge fund management company is seeing a business opportunity in crypto price swings where many others complain of and stay away from crypto due to huge volatility.
According to the company’s CEO Luke Ellis, the company capitalizes on cryptocurrencies as a trading instrument despite cryptos having no “inherent value.”
“If you look at cryptocurrencies as a whole, it is a pure trading instrument. It has no inherent value. It’s a tulip bulb,” Ellis told Reuters, referring to the flower that became the focus of a 17th-century Dutch financial mania.
This and more prove that hedge funds are increasingly interested in digital assets despite the cold hand from traditional asset managers. Despite many of those with low-risk tolerance staying away from trading and investing in crypto because of the inherently high risk, a previous study by Intertrust has shown that hedge funds may globally invest up to 7% of their total worth each in crypto during the next five years. The survey involved 100 executives of hedge funds from around the world.
Man Group, which also trades Bitcoin futures, is leveraging its quantitative models to gain trading profits from cryptocurrency as one of the “probably 800 markets that it operates plus 15,000 stocks and thousands of credits,” he said. The company drives insights from the models on whether to go short or long. It trades in as much market liquidity as the market allows.
However, the company does not treat crypto as an asset management product they have to own to offer value to investors. Ellis also doesn’t think that tokens will always be a limited supply of instruments. He, however, said that blockchain – the technology that underlies cryptocurrencies — has the potential to change everything in payment systems.
Of customers who use crypto to hedge inflation, Ellis said most worry about inflation, and the anxiety would continue until central banks lose control, adding that when they do, “it will not be fun.”