Former Citibank Trading Executive Floats $1.5 Billion Crypto Fund

Matt Zhang, a former trading executive at the multinational financial institution Citibank has launched the Hivemind Capital Partners to back unique and innovative startups or protocols in the digital currency ecosystem. 

Hivemind Capital’s Targets

Hivemind unveiled the inaugural sum of $1.5 billion to invest in crypto companies, digital trade assets and feature a first-of-its-kind, dedicated “play-to-earn strategy” in the gaming space. The first tranche of the funding, according to the firm, will be deployed to verticals, including crypto infrastructure, blockchain protocols, open internet, programmable money, and virtual world. 

“We believe blockchain technology is a paradigm shift, and we are still in the early innings. Our mission is to provide start-to-finish capital and infrastructure solutions to visionary entrepreneurs and category-defining crypto projects,” said Matt Zhang, Founder and Managing Partner of Hivemind.

“The traditional asset management model is not designed to do this, which is why we are building a tailor-made crypto investment platform from the ground up that also offers the infrastructure institutional investors need for risk management, compliance, and security.” 

The venture fund said it has inked Algorand as its first technology partner, reiterating its intention to extend the partnerships to other layer-1 blockchain networks. Zhang’s 14-years of experience in the banking industry will be deployed in carving out an exceptional operational performance for the fund’s investors.

Increasing Venture Funding Pouring into the Crypto Industry

The launch of the Hivemind Capital crypto fund is not an uncommon push by mainstream investors to gain a closer and more direct appreciation of the growing digital currency industry. As early as June this year, popular venture capital company Andreessen Horowitz (a16z) floated a $2.2 billion dedicated to the digital currency ecosystem. 

A number of venture capitalists have also been backing crypto startups, all in a bid to catch on to the growth of the fast-growing industry.

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Fresh Bitcoin price highs put bulls in profit for Friday’s $1.2B BTC options expiry

Every time a new Bitcoin (BTC) all-time high is formed, excessive expectations follow. This time was no different as its price briefly touched $69,000 in the early hours of Nov. 9. 

Words are just words, so there’s no loss from being excessively bullish or bearish, but in options markets there’s a cost for placing those bets. For example, on Nov. 10, a right to buy Bitcoin (call option) at $100,000 on Dec. 31 is trading at BTC 0.022, or $1,460. For this privilege the investor pays an upfront fee which is also known as the premium.

Analysts and pundits quickly issue their $100,000 targets after Bitcoin posts its highest monthly close ever. However, history has proven that short-term price estimates seldom work, and it doesn’t matter if you’re an anonymous Twitter figure or a well-versed multi-million dollar crypto fund manager.

Bitcoin price estimates are often far off

Despite being a widely successful venture capital investor, Tim Draper’s $250k price guess for 2020 was off by 88%. Even renowned bank analysts can get it very wrong, as did a Citibank FX Wire “Market Commentary” from Nov. 2020 where they cited a potential $318k high in 2021. Still, with 50 days till year-end, maybe some of those prophecies will turn out true, but the majority remains no better than random numbers.

Bears are possibly eyeing regulatory hurdles, for example, Singapore became the latest region to ban crypto derivatives exchanges services. Huobi Global announced on Tuesday that it would shut down accounts of all Singapore-based users by the end of March 2022. In September, Thailand’s Securities and Exchange Commission also recommended revoking Huobi’s local operating license.

An initial analysis based on the open interest of call (buy) options and put (sell) instruments presents a balanced situation for Nov. 12’s $1.3 billion options expiry.

Bitcoin options aggregate open interest for Nov. 12. Source: Bybt

At first sight, the $630 million call (buy) options dominate the weekly expiry by a mere 12% compared to the $565 million puts (sell) instruments.

However, the 1.12 call-to-put ratio is deceptive because the recent rally will probably wipe out most bearish bets. For example, if Bitcoin’s price remains above $66,000 at 8:00 am UTC on Nov. 12, virtually every put (sell) instrument becomes worthless. There is no value in a right to sell Bitcoin at $58,000 or $62,000 if it’s trading above that price.

Bulls might aim for a $410 million profit above $70,000

Below are the four most likely scenarios for the Nov. 12 expiry. The imbalance favoring either side represents the theoretical profit. In other words, depending on the expiry price, the active quantity of call (buy) and put (sell) contracts varies:

  • Between $64,000 and $66,000: 2,440 calls vs. 310 puts. The net result is $135 million favoring the call (bull) instruments.
  • Between $66,000 and $68,000: 3,430 calls vs. 50 puts. The net result is $225 million favoring the call (bull) instruments.
  • Between $68,000 and $70,000: 44,070 calls vs. 10 puts. The net result is $305 million favoring the call (bull) instruments.
  • Above $70,000: 5,820 calls vs. 0 puts. The net result is complete dominance, with bulls profiting $410 million.

This crude estimate considers call options being exclusively used in bullish bets while put options in neutral-to-bearish trades. This oversimplification disregards more complex investment strategies.

For instance, a trader could have sold a put option, effectively gaining a positive exposure to Bitcoin above a specific price. Unfortunately, there’s no easy way to estimate this effect.

The bears’ best hopes turned out to be ineffective

After a 19% rally in 30 days, bulls dominate Nov. 12’s weekly expiry. One factor that may have been partially responsible for that move was the absence of an adverse price impact after the $1 trillion U.S. infrastructure bill passed the United States House of Representatives. The bill mandates all digital asset transactions worth more than $10,000 to be reported to the IRS.

Traders must consider that even bearish news has little to no impact on the price during bull runs. Moreover, the effort bears need to pressure the price is increased and usually ineffective.

Bulls might take advantage of the current situation by pushing BTC above $70,000, which would result in an additional $105 million estimated profit which would push their total to $410 million.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.