Crypto wealth manager Wave Financial bullish on bitcoin, as cryptocurrency soars towards two-month high

Bitcoin volatility

As bitcoin surged towards a two-month high on Monday (26 July), digital assets-focused investment manager Wave Financial is bullish on the cryptocurrency’s future prospects amid the ongoing institutionalisation of the sector.

Matteo Dante Perruccio, president international and partner at Wave Financial, which manages almost USD600 million in assets across wealth and fund management functions, said bitcoin has successfully weathered an “onslaught” of negative developments in recent months.

The world’s foremost cryptocurrency staged a dramatic rebound early on Monday following protracted price volatility, nearing a two-month high of almost USD40,000 as rumours surfaced that Amazon may begin accepting the coin as a payment method.

Bitcoin serves almost a bellwether for digital currencies, Perruccio observed, noting it represents between 46-48 per cent of digital currencies’ market cap.

“At a macro level, what’s transpired has been an onslaught of mostly negative news over the last six months – China closing down the bitcoin miners; the ESG observations by Elon Musk and others – which has put pressure on bitcoin as a bellwether,” he told Hedgeweek on Monday.

“But it’s been a positive development, because bitcoin has withstood that very strong onslaught and has settled around the 30s.”

Since emerging as one of the first regulated investment advisors in the cryptocurrency space in the US, Wave Financial now has offices in Los Angeles and London, running five investment strategies and a range of wealth management functions.

These include a volatility-based derivatives fund, as well as two venture capital strategies, and a novel tokenised whiskey barrel fund which aims to capture the value appreciation of Kentucky bourbon ageing.

“Our ethos is about giving broad diversified exposure to crypto,” he said. “We do that through funds, most of which are actively managed, or VC. We also have a managed account platform that offers high net worth individuals either exposure to crypto, or yield on their existing crypto exposure, and we have treasury management for corporates and protocols.”

Wave Financial’s crypto derivatives-based strategy, the BTC Digital Income and Growth Fund, is up 42 per cent so far this year, having gained almost 146 per cent in its first full year of operation. Using a covered call approach, the fund aims to capitalise on bitcoin’s long-term growth attributes and generate a significant premium from the asset’s high volatility.

Perruccio said bitcoin is “inherently deflationary”, with a limited number of coins that can be issued, with a halving process approximately every four years which creates a deflationary effect.

“It has these characteristics that hedge funds identify as being very useful to have in their portfolios,” he added. “Understandably, one of the strategies that has made money over the last two years has been high-velocity trading with algorithms.  But that has got a lot harder over recent months, and a lot of those strategies got whipsawed, because bitcoin has been really volatile.”

Turning to the ongoing institutionalisation of digital assets, Perruccio believes the arrival of institutional allocators, the proliferation of listed products, the development of “intelligent” regulatory oversight, and the growing number of service providers, such as custodians, all bodes well for the medium-to-long-term future of the sector.

“A lot of what I was hearing in the digital space was analogous to what I had heard in the very early days of hedge funds,” Perruccio says, pointing to initial market scepticism and investor reluctance towards the asset class.

“There was a feeling that these returns can’t possibly be true, that there would be a blow-up. It’s normal for us now to think about absolute return, but back in the day when hedge funds were young, it was all about relative returns to a benchmark, whether it was fixed income or equities. Substitute hedge funds then for crypto now, and a lot of it is the same commentary.”

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Hugh Leask
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