According to Bloomberg, hedge funds are increasingly turning to crypto markets for higher return opportunities. Ed Tolson, founder and CEO of Kbit, emphasized the potential in crypto native markets, stating that exposure to centralized crypto exchanges, trading tokens, perpetual swaps, and derivatives is essential. Kbit, managing nearly $160 million in assets, employs a market-neutral trading strategy to profit from both rising and falling prices while minimizing overall market risk. The firm, based in the British Virgin Islands, also functions as a market maker. Tolson did not disclose the fund’s performance due to client confidentiality.
In traditional markets, hedge funds often use the basis trade to capitalize on price differences between an asset and its futures. With the advent of Bitcoin and Ether ETFs, these funds have started applying similar strategies by buying ETFs and shorting Bitcoin futures on the CME. Tolson noted that this approach is more profitable when executed with native crypto instruments, such as buying spot crypto and shorting perpetual swaps. Perpetual swaps are futures contracts without an expiration date and are available only to non-US customers. Tolson, who previously served as the director of trading technology at Citadel Securities before founding Kbit in 2017, described Kbit as a quantitative trading firm that trades any asset with volume and inefficiencies that can be exploited.
Kbit trades around 500 different tokens, regardless of their fundamentals, according to Tolson. The firm has made seven new hires this year, including Thomas Johnson, a former senior quant developer at Citadel, as principal research engineer, and Sean Slotterback, who spent five years at another firm. This expansion reflects Kbit’s commitment to leveraging quantitative strategies in the evolving crypto market landscape.