Bitcoin volatility has long been a feature of crypto markets, but recently it has reached stratospheric levels as global markets balk at the threat of inflation and rising interest rates.

Last week, liquidations in the crypto markets reached $200 million ($280 million) per day, as bitcoin and many other coins were pumped and dumped in hours, reacting strongly to reports according to which US inflation had reached a 40-year high.

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The selloffs in the crypto markets are compounded by highly leveraged investors, with loans secured on blockchains. Once a sell is triggered, liquidations follow one another across blockchains as investors scramble to cover their positions, prompting prices to rise widely as money flows in and out. .

Bitcoin is up 1039% since March 2020 and Ether is up 2940%, although the rallies of the two cryptocurrencies were interrupted by several strong selloffs.

Bitcoin has fallen from a high of nearly $69,000 in November to below $40,000 at the start of 2022.

Zerocap believes this volatility provides an opportunity as sophisticated investors, whether family offices or funds, are looking for ways to gain global exposure to bitcoin, but without the day-to-day fluctuations.

According to a recent Goldman Sachs report, 15% of family offices are already exposed to crypto.

The Smorgon family has backed Zerocap since last year, when a descendant of Victor Smorgon, Peter Edwards, took a strategic stake in the company among a series of crypto-based investments, including Melbourne-based Apollo Capital and Polychain. Capital in San Francisco.

Investment companies around the world are playing with structured products. The Chicago Mercantile Exchange was one of the first to offer futures settled in bitcoin, ether, or US dollars.

Wealth managers have struggled to provide crypto exposure to their wealthiest clients, who are demanding information on how to position themselves.

Zerocap, which has large positions in Solana and Fantom, two scalable blockchain platforms for DeFi and crypto applications, has been granted a derivatives trading license and plans to roll out a suite of structured products for a growing number of sophisticated investors and family offices wishing to manage this. volatility.

“Volatility isn’t bad if you have ways to earn extra yield and exploit its downsides,” said Jonathan de Wet, chief investment officer at Zerocap.

The Smart Beta fund will reweight its assets weekly to map exposure to 14% volatility, and is launching now just as investment banks and mainstream firms prepare to include crypto-based strategies.

As it stands, many crypto investment firms buy and sell “directionally,” meaning they buy when the market goes up and sell when it goes down.

“This is the opportunity for us people can make better risk-return trade-offs when using derivatives rather than the spot price,” Mr Chapple said.