Bitcoin should become the industry benchmark, the founder of the senior fund reveals the investment strategy

Michiel Lescrauwaet, co-founder of bitcoin investment fund Adamant Capital, recently spoke about the company's investment strategy and five ways to invest beyond Bitcoin's return.


Adamant claims to be a Bitcoin Alpha Fund, meaning to try to surpass Bitcoin's performance. It also believes that Bitcoin should be used as a benchmark for the entire cryptocurrency industry, rather than borrowing from traditional financial investment frameworks like most crypto asset funds today.

Lescrauwaet said: "The effective bitcoin investment strategy depends on the maturity of the market." He added that we have entered the "infrastructure phase" from the initial "exploration phase." (As shown below) He said that there are still some technical risks in locking Bitcoin in the expansion scheme Lightning Network, and it has not yet realized its true meaning.


(Bitcoin investment phase changes, image source: Adamant Capital)

He said that the goals, experience and risk appetite of individual investors are also key. He mentioned the various frameworks they built from the perspective of risk and return.


(Investment Strategy vs hodling, Image Source: Adamant Capital)

The company also provides investors with a convenient flow chart to help them decide which strategy is correct.


(Strategy flow chart, image source: Adamant Capital)

Then, Lescrauwaet delved into some of the strategies that investors should consider today.

1. Avoid bitcoin lending

Lescrauwaet said that in the bull market, lending a bitcoin can earn around 2.5% a year. This is because the demand for Bitcoin is not large, but in the bear market, when people want to short the bitcoin, this figure reaches about 6% (2018 data). He said that for several reasons, he insisted that this was not a good deal. Counterparty risk remains an important factor and tax considerations need to be considered, especially in the US.

2. Use Bitcoin as a mortgage

Bitcoin can be deposited in a custodian, borrowed as a collateral, and the dollar can be used to purchase more bitcoin. Interest on borrowing dollars can also be exceeded by options, futures and other strategies. Lescrauwaet said that this is Adamant's favorite strategy because the risks are relatively low, the returns are relatively high, and it gives you the flexibility to monitor your returns every day.

3. Calculate the bitcoin cycle

Lescrauwaet said it is not easy to use investment to profit from a bull or bear market. Data that others don't have can give you an edge in the market. But this is not easy to do. One of the indicators recommended by Adamant is "Bitcoin Relative Unrealized Profit/Loss", which is an indicator of the overall return of investors in the bitcoin market. He pointed out that Adamant's data shows that when the income reaches 80%, the market will often fall. At the moment, he added, "We are around 40%, so there is still room for improvement."

4. Invest in “high risk” competition coins

Lescrauwaet said that investing in “high-risk” competitive currencies is one of the more risky strategies people adopt, but it also means high returns. Investors usually use the beta coefficient (risk factor; volatility factor) to measure the extent to which a stock is affected by volatility. The beta coefficient for the entire market is 1, so any stock with a beta coefficient greater than 1 is considered to be more volatile than the market. Lescrauwaet said that the proceeds from investing in high-risk competitive currencies will likely exceed Bitcoin. But he believes that this is a risky form of investment, and success will depend on the skill of the investor. According to cryptocurrencyliveprices, the current top three cryptocurrency beta coefficients are: BTC 0.96, ETH 1.16 and XRP 1.05.

5. Investing in cryptocurrency hedge funds

Lescrauwaet emphasizes that when using this strategy, the research fund's partners and investment performance are very important, but also the fee structure. He recommends funds that use bitcoin fees. Another key issue, he said, is the benchmark for hedge funds. He said that using traditional benchmarks such as the S&P 500 means that the final result is similar to an equal-weighted index. Bitcoin and Ripple each account for about 30%, Ethereum accounts for 27%, and other competitors account for the rest. Lescrauwaet said that the problem with this combination is "this is a completely subjective heterogeneous portfolio of projects." He believes that the price of Bitcoin itself should be used as a benchmark or index because its "money value is unmatched." He added that "based on Bitcoin, "more than 92% of ICOs are not as good as Bitcoin."

Adamant is always bullish on Bitcoin. Earlier this month, the company's co-founder Tuur Demeester said that we are not in a bear market. Instead, he insists that this is a "bitcoin bull market after the ICO bubble."

Most notably, he compared today's bitcoin to Amazon in 2003, calling it "screaming for purchase."