Chris Solarz, the head of digital asset investments at Amitis Capital, highlighted the immaturity of investment strategies in the cryptocurrency markets and stated that hedge fund managers are still applying strategies that were abandoned in traditional markets years ago. Solarz suggested that the current market conditions are presenting significant opportunities for cryptocurrency hedge funds, while predicting that a vast majority of the 40 million tokens in the ecosystem will eventually plummet to zero.

GOLDEN AGE FOR CRYPTO HEDGE FUNDS
Managing a fund focused on cryptocurrencies at Amitis Capital, Chris Solarz told CoinDesk in an interview that competition in the sector remains much lower compared to traditional financial markets. According to Solarz, hedge fund managers operating in the crypto markets continue to utilize investment strategies that were used in traditional hedge fund markets during the 1990s but have since lost validity. Solarz pointed out that in 1990, there were only 127 hedge funds worldwide managing assets totaling $39 billion. By 2024, the number of hedge funds had risen to over 10,000, managing assets worth $5 trillion. This transformation has intensified competition in traditional markets, making success more challenging. However, Solarz stated that the crypto hedge fund sector is still relatively non-competitive, allowing for the reapplication of old investment strategies.

Solarz emphasized the importance of evaluating managers’ investment processes and risk management when assessing funds to invest in. He mentioned that understanding the success of a fund involves examining the manager’s process and investment strategies. Solarz also noted that with changing market conditions, the era of all altcoins rising together has ended. He highlighted that there is currently no broad buyer base in the market, with retail investors trending towards meme coins, making it difficult for large funds to find liquidity.

END OF ALTCOIN SEASON: 99.99% OF TOKENS WILL GO TO ZERO
Solarz expressed that approximately 40 million tokens in the crypto ecosystem will become worthless in the long term, stating that only 100 tokens are worth discussing. He mentioned the need for at least $300 billion in new capital for the crypto ecosystem to sustain its current levels due to market oversupply and significant token unlocks. Solarz also stated that with market conditions changing, short-term altcoin bull markets appear unlikely.

Furthermore, Solarz highlighted that market-neutral strategies remain highly profitable, allowing institutional investors to generate returns independent of market volatility. He provided the example of South Korea, where funds arbitraging price differences on Korean exchanges following President Yoon Suk Yeol’s declaration of martial law in December 2023 earned significant profits. Solarz also mentioned that leveraging funding rates in perpetual contracts is a popular strategy among institutional investors, enabling them to earn interest of up to 30% annually while remaining market-neutral.

Solarz concluded by pointing out that the liquid token market for hedge funds is approximately $30 billion in size, providing significant return opportunities for large investors in this segment. However, he stressed that more time is needed for the market to be fully embraced by institutional investors, anticipating complete integration of the crypto market with the rest of the financial sector in the future.