Alessandro Balata, Louis Stewart, and Nikita Fadeev, Partners at Fasanara Digital, the crypto arm of Fasanara Capital, discuss trends in the market, the role of off-exchange settlement solutions and the way technology has helped facilitate progress.
PARTNER CONTENT
The growing institutionalisation of crypto markets and the wider adoption of these assets by retail investors have further underlined the importance of risk management in the space. Alessandro Balata, Louis Stewart, and Nikita Fadeev, Partners at Fasanara Digital, the crypto arm of Fasanara Capital, discuss trends in the market, the role of off-exchange settlement solutions and the way technology has helped facilitate progress.
What opportunities do you see emerging in the industry in the near future, and how are you positioning your firm to take advantage of these opportunities?
Alessandro Balata: We see two primary opportunities emerging. Firstly, the continuing institutionalisation of crypto markets, and secondly, the broader adoption of digital assets by retail investors. The impending launch of spot crypto ETFs by industry giant Blackrock exemplifies both of these trends. We anticipate a significant influx of new market participants and capital, thereby increasing the liquidity and depth of crypto markets. To position our firm for these opportunities, we are proactively optimising our liquidity provision strategies. We are doing this by focusing on achieving the highest possible risk-adjusted performance, ensuring fluid markets and efficient price discovery. By doing so, we aim to facilitate smooth transactions for the new wave of investors, while capitalising on the increased trading volumes and market opportunities that these developments are likely to bring.
The growing institutionalisation of crypto markets and the wider adoption of these assets by retail investors have further underlined the importance of risk management in the space. Alessandro Balata, Louis Stewart, and Nikita Fadeev, Partners at Fasanara Digital, the crypto arm of Fasanara Capital, discuss trends in the market, the role of off-exchange settlement solutions and the way technology has helped facilitate progress.
Louis Stewart: Our approach to attracting and retaining the best experts is multifaceted. We pride ourselves on fostering a research-driven, collaborative environment that promotes fast-paced development. Our team members are given the chance to work alongside industry veterans with years of trading expertise in the cryptocurrency space, offering unparalleled opportunities for learning and professional growth.
Additionally, our flat hierarchy and meritocratic ethos ensure that all voices are heard. We value the contribution of every team member, and believe that every idea has the potential to make an impact. This creates a sense of ownership and responsibility among our team, as every individual plays a pivotal role in the progress of the firm. As a result, our team members feel valued and invested in our collective success.
How are you approaching risk management, and what steps are you taking to ensure you have adequate risk controls in place?
Alessandro Balata: Our approach to risk management is characterised by a rigorous and systematic process. We operate as a fully delta-neutral trading firm, ensuring that our exposure to market risk is always near-zero across the universe of traded coins.
While employing a delta-neutral strategy effectively tempers the volatility of returns, it’s imperative to acknowledge that this doesn’t completely insulate us from the risk of a counterparty’s insolvency. To address this, we have embraced off-exchange settlement solutions which have been instrumental in not only mitigating counterparty risk but also in bolstering our capital efficiency. Over the recent months, we have been steadfast in fortifying the safety of our assets. We take pride in being among the pioneering institutional players to swiftly incorporate these cutting-edge risk mitigation tools as they surfaced. Currently, a significant portion of our trading activity has transitioned to segregated accounts, which further exemplifies our unwavering commitment to safeguarding both our and our investors’ interests.
Are you leveraging technology to increase efficiency and reduce costs in your firm’s operations? How have you been putting this into effect?
Louis Stewart: Technology is a vital part of our operations, and we leverage it extensively to enhance efficiency, reduce costs, and boost performance. Our firm employs a robust, in-house team of software developers and quantitative researchers with a deep understanding of the financial industry and the cryptocurrency landscape. Their expertise enables us to design and implement tailored technological solutions that align with our trading strategies and operational needs.
We strive for automation in every aspect of our operations. This extends from implementing systematic trading rules that can manage billions of dollars of turnover per day, to automating collateral management across various trading venues and blockchains. This level of autonomy reduces operational pressure on our team, allowing them to focus on strategy development and decision-making.
Has the approach to portfolio construction been changing and how are managers managing portfolio risk in the current market environment?
Nikita Fadeev: In terms of portfolio construction, our approach largely remains consistent. We primarily construct our portfolio using spot and derivative instruments traded on some of the largest and most reputable crypto exchanges and OTC trading venues. Recently, the focus has been more towards the largest coins in the market, as projects with lower market capitalisations fall in and out of favour rapidly.
Given that our primary focus is on liquidity provision, it is critical for us to be agile and prepared to manage market fluctuations. The market microstructure has been changing and it is essential to adapt to these changes. Our approach includes a thorough and continuous analysis of every stage of the trade lifecycle. This allows us to measure and optimise our strategies efficiently, ensuring that we keep pace with the evolving market conditions.
Fasanara Digital: Fasanara Digital was established 5 years ago and is the crypto arm of Fasanara Capital, a 12-year-old boutique alternative asset manager. We are a Quantitative Investment fund applying a scientific approach to investing in crypto assets. Our goal is to achieve exceptional risk-adjusted returns. We pursue a range of diversified and highly sophisticated investment strategies that seek to profit from inefficiencies in the market structure and range from market-making to cross-exchange arbitrage.
