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In a space filled with risky investors and traders, a blockchain fund managed by value managers believes it can give investors a higher return than bitcoin itself.
Bitcoin has been named by some as the best asset of the decade. Off the Chain Capital, a fund that pursues a traditional value-for-money strategy – using fundamental analysis to find undervalued assets – says its fund has outperformed bitcoin in each of the past five years.
The fund has averaged 133% per year since its inception in 2016, compared to about 108% on average per year for bitcoin, according to Off the Chain. The company uses the combined annual growth rate for both the fund and bitcoin, using a starting date of December 31, 2016 and ending on February 28, 2022.
“We outperformed bitcoin in five out of five years and did so with 80% less volatility than bitcoin,” said Brian Estes, the fund’s chief executive and chief investment officer. “This is something I’m really proud of, because I’ve built it so that donations, foundations and other conservative investors can get exposure to blockchain assets and get this lack of protection.”
He also said that it outperformed the S&P 500 by 3653% over the same period and was 99.99% unrelated to the broad market index, which means that the two are not moving up and down in tandem.
Looking for value
The fund’s strategy is to detect incorrectly valued assets in the blockchain space.
It aims to buy blockchain assets worth one dollar for 50 cents and make a return on the purchase of assets, instead of buying them at fair market value and letting them grow. In this way, it can apply a value approach while capturing the growth of a still young industry.
For example, Off the Chain was a big buyer of Mike Novogratz’s Galaxy Digital stock two years ago, which then cost about 70 cents, Estes said. Shares ended Tuesday at $ 15.79 per share.
According to Estes, Silvergate Bank is another company whose prices are wrong. The crypto-friendly bank went public two years ago and was valued as a bank when operating as a crypto company.
“It was valued at eight times the revenue and three times the book value, and what people didn’t realize was that Silvergate is not a bank, it’s a crypto company that essentially has a monopoly on most crypto companies.”
As a result, its profits are growing by more than 100% a year, he added.
Private capital accounts for about half of the portfolio. The company is also looking for digital assets at the wrong price, including bitcoin.
Ensuring diversification
Off the Chain is one of the biggest buyers of Mt. Gox. Mt. Gox was once the biggest keeper of bitcoins, until a Russian hacker stole almost everything – about 740,000 bitcoins then worth $ 460 million.
The fund buys these receivables from people with an average discount of about 80%, Estes said.
“Our view is that bitcoin is a winner in value retention and a key diversification tool for portfolio allocators. “If you can’t outperform bitcoin as a fund, you can just own bitcoin and not pay management fees,” Purcell said.
He also views Binance and its useful token, BNB, as undervalued assets.
“It is currently valued in the same way as Coinbase, but trades about 4.2 times the volume of Coinbase,” Purcell told the stock exchange. “They also developed the Binance Smart Chain, which distances developers from other communities like Ethereum, and we believe it’s a game of value.”
The fund currently has about 200 limited partners and $ 399 million under management. It is aimed primarily at institutions, donations, family offices and other wealthy people for a minimum of about $ 1 million.
Estes said the fund currently has the capacity for another $ 200 million to go into the fund. It is also “very likely that a bitcoin fund for algorithmic trading in artificial intelligence will be opened in the next six months.”