$200M hedge fund pauses crypto arbitrage trading amid market downturn
Crypto hedge fund Nickel Digital Asset Management cycled into a cash position as the crypto market collapse.
According to the report from Bloomberg, the $200 million crypto hedge fund led by JPMorgan and Goldman Sachs alumni redeployed its capital in anticipation of another explosive price run for cryptocurrencies.
Nickel Digital, prior to piling into a cash position, focused on cryptocurrency arbitrage opportunities resulting from cryptocurrency price differences across the spots and derivatives markets.
Crypto arbitrage trading offered double-digit annualized gains for institutional investors with sufficient capital to make sizable returns on these momentary price gaps.
Nickel Digital has earned 29% in gains at 3% volatility, far lower than the 78% market average for crypto assets.
However, Bitcoin’s blow-off top back in April and the ensuing altcoin capitulation in May has reportedly upended these arbitrage opportunities for hedge funds like Nickel Digital.
Bitcoin’s price crashed 50% from its $64,000 all-time high triggered a cascade of liquidations in the futures market especially for over-leveraged longs to the tune of about $9 billion. Following the largest cryptocurrency, the Altcoin market also crashed over 70%.
Back in June, Alex Mashinsky, CEO of crypto lending platform Celsius, stated that he can see Bitcoin reaching a new all-time high of $160,000 before the end of the year.