27 October 2017
Click here for the article on opalesque.com. Or read the extract below as it appeared in the Opalesque Alternative Market Briefing.
'BITSPREAD, A MARKET MAKER FOR CRYPTOCURRENCY'
Bailey McCann, Opalesque New York:
As the debate rages over the value and legitimacy of digital currencies, some firms are stepping in to institutionalize the market. London-based BitSpread has launched two strategies to support the growing ecosystems of digital currency exchanges.
BitSpread acts like a market maker of sorts. The firm works with exchanges that trade blockchain assets, vetting both the exchange providers and traders. For those that make it onto BitSpread's trusted partner list, the firm's technology can create notional value for the exchanges - providing liquidity and supporting risk management.
BitSpread was launched in 2014 by Cedric Jeanson, who was previously COO at Nomura.
"Our goal is to be a trusted bridge between the trader and the exchanges," Jeanson says in an interview with Opalesque. "We started in this space early and we have built a reputation for being able to identify who is credible and who isn't."
BitSpread runs two funds that trade the spreads within the cryptocurrency market. The flagship strategy is a market neutral liquidity strategy that uses cross-market arbitrage, carry arbitrage, lending and borrowing to generate a return for the fund while remaining neutral to swings in blockchain assets. The fund launched in June of 2014 and is up 78.83% year-to-date through September.
"Investors like the strategy because they can participate in blockchain assets, but they are insulated a bit from some of the volatility in the market," Jeanson says. "It is the only fund that is purely market neutral and doesn't carry pricing risk. We're working with people that have AML/KYC backed money, this isn't the dark web stuff you hear about."
BitSpread also runs a straightforward long-only growth strategy, which takes a long position on a basket of blockchain assets. That strategy is up more than 300 percent this year.
For Jeanson, supporting the ecosystem of exchanges with liquidity is another step toward making digital currency viable for the full scope of financial services. "Right now, this is a market for currencies that are of the people," he notes. "We want to build the food chain from primary to secondary and do it with the most credible players in the space." That's a tall order in today's market, with the hype around bitcoin and other digital currencies hitting a fever pitch.
When asked about how he monitors all the new growth Jeanson laughs. "Everyone is talking about how they have a blockchain something now, but once you get even an inch below the surface, it's easy to find out who is really doing something and who is just talking," he says.
We also asked Jeanson what he makes of the contention from Jamie Dimon and others that bitcoin is a fraud. "Of course he's going to say that - people are going around JP Morgan and the other banks," Jeanson said. "If he's going to fire traders for bitcoin, send their resumes to me. We're hiring."