Investing in crypto fund, we should explore the strategies that fund managers use to increase their investments.
Bull and Bear Index
In this case, fund managers look at assets they believe are undervalued and overvalued, and then build bear and bull markets accordingly. If their analysis is correct, their portfolio should be profitable whether the market goes up or down.
Market Neutrality
Here, the goal is to balance bull and bear markets so that the net exposure to market risk is zero. Therefore, a manager may take a 50% bear markets and 50% bull markets in the same industry or asset in an attempt to reduce the risk from volatility. It should be noted that reduced risk also usually means lower returns, which is an acceptable compromise for some people.
Arbitrage
There are many types of arbitrage, but the general idea is to buy an asset on one exchange and sell it on another exchange with a higher price. This is common among traditional hedge funds, but due to the young and volatile nature of the cryptocurrency market, it often offers more lucrative opportunities.
It is common for different platforms to offer slightly different prices for various assets, and if you can move fast enough, it is relatively easy to make a profit. Having said that, speed is key, which makes this strategy a popular favorite among high-frequency traders.
There are other strategies like:
1.Global Macro Strategy:It focuses on taking positions based on larger trends within the market;
2.Short-sale-only Strategy:It’s basically focused on explicitly shorting assets that fund managers think are overvalued;
3.Quantitative Strategy:It only focuses on models, data and research to build portfolios.
In fact, it is not uncommon to use multiple different strategies, but it is crucial that fund managers understand any one they implement and be transparent with investors.
