Crypto Provides Attractive Asymmetric Risk: Expert Opinion

Mati Greenspan

Crypto Provides Attractive Asymmetric Risk: Expert Opinion

Note: “This analysis is an adaptation from the work of Mati Greenspan, Senior Market Analyst at eToro

Key Highlights

  • Two Large pension funds invest USD 40 million in cryptos
  • While the amount is in actual terms looks good, it’s just 0.7% of the fund
  • With this minimal investment, the risk to the upside far outweighs the downside risk.

Cryptos has Asymmetric Risk

As the news of the two Fairfax funds investing $40 million into cryptos hit the street, it bought a definite joy to every crypto investor. But for the fund, this investment was opportunistic and lucrative created a position where cryptos provided an attractive asymmetric return profile.

To explain, the two Fairfax funds involved in this investment have a combined $5.7 billion under management. So the $40 million they’ve put into crypto is only 0.7% of that. This is good money management at play.

Should the crypto market see another year like 2018 with an 80% drawdown, the fund will only lose 0.56% of its total portfolio. As long as the rest of the portfolio performs properly, nobody will even notice the hit. But, If crypto has a fantastic year as it did in 2017 and rises by 1000%, their overall portfolio will rise by 7%. This is what we call asymmetric risk, where the risk to the upside far outweighs the downside risk.

Traders and investors are always looking for an advantageous risk/reward ratio and now that we’ve already seen a large retracement in the crypto market, the ratio is becoming very attractive. Now that Fairfax County has opened the door, it will be interesting to see if other traditional fund managers join in.

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Expert Opinion: Crypto Provides Attractive Asymmetric Risk
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Expert Opinion: Crypto Provides Attractive Asymmetric Risk
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- Two Large pension funds invest USD 40 million in cryptos - While the amount is in actual terms looks good, it's just 0.7% of the fund - With this minimal investment, the risk to the upside far outweighs the downside risk.
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Nilesh Maurya 611 Articles

Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Reach out to him at Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Reach out to him at [email protected]

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