- Bitcoin hasn’t had the best start to a year and is down 45 percent from its all-time high, leading investors to explore other avenues for revenue.
- Some institutional investors have revealed that their secret to continued revenues is investing in native exchange tokens like FTX’s FTT and Bitfinex’s Unus Sed Leo.
The cryptocurrency market has yet to recover since it dipped from its all-time highs in November last year. Bitcoin and Ethereum are down 45 percent, while Solana and Polkadot are 65 percent below their records. With this bearish market, investors are having to become creative in their investment to keep on racking up the revenues. As some institutional investors revealed, their unique strategy has been investing in native exchange tokens which have been somewhat immune to the dip.
As CNF reported, Bitcoin’s status as a safe-haven asset has been debunked of late, with turmoil in Easter Europe revealing just how linked BTC is to the overall market. The 60-day correlation of BTC to the S&P 500 has also been at a record high at 0.6.
Read More: What’s the use of a hedge if it doesn’t work when you need it? Bitcoin narrative under attack
Jeff Dorman, the chief investment officer at Arca, a Los Angeles-based digital asset fund manager, commented:
For some reason, people still think Bitcoin is a defensive asset, even though it has absolutely no characteristics of a defensive asset. The things that should be defensive are exchange tokens because there’s real revenues, cash flows and amortizations.
For Arca, the strategy has been investing in exchange tokens, and one of its biggest bets has been on Unus Sed Leo, the native token of Bitfinex. Arca first invested $3 million in the token back in 2019 at $1 per token, just after Bitfinex launched it to shore up its cash crunch. Jeff describes this investment as “one of the best risk-and-reward investments” the firm ever made. The company later sold its holdings at $5.50 per token.
At a time when there has been extreme volatility, exchange tokens have been the biggest gainers, Dormans says. He told Bloomberg:
Fundamentally, who benefits from the volatility? The exchanges. Exchange [tokens]should outperform because their volume and revenues go up.
Another exchange token that has been quite resilient is FTT, the native token of the Sam Bankman-Fried led FTX exchange. The derivatives trading platform has burst onto the limelight in recent years with a raft of sports partnerships, not least its $135 million naming rights deal with the Miami Heat NBA franchise.
Clara Medalie, the research director at Kaiko, a crypto data firm, commented:
FTX’s token is strongly correlated to any positive news coverage. FTX has had a better year than most other exchanges that have their own exchange tokens, so it isn’t surprising that FTT is positive.
“Smart investors are investing in exchange tokens,” Arca’s Dorman summarized it. “Certainly anybody who does any real fundamental analysis and cares about the growth of real business.”
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