An unexpected strategy in a crypto pool: leveraging Bitcoin and S&P 500 returns

A crypto fund is buying Bitcoin at a huge discount in a high-risk, high-yield game. What are the odds of beating BTC?

Bitcoin has been one of the best performing assets on the planet since its launch in 2009. The price of digital currency rose nearly 9 million percent between 2010 and 2019. Simply maintaining or averaging Bitcoin’s (BTC) positions produces a certain profit parameter. Finding an investment or trading strategy that exceeds Bitcoin Supersplit performance can be difficult, but a financial fund known as Off The Chain Capital has claimed to do just that. The fund has also outperformed the S&P 500, a popular general financial market index, although the S&P presents itself as a less formidable opponent in terms of price gains.

„It’s easy to outperform the stock market because if you look at Bitcoin relative to other assets such as dollars, gold, stocks and bonds, Bitcoin is absorbing the entire value of those assets,“ Brian Estes, the fund’s founder and chief investment officer, told Cointelegraph. Bitcoin naturally provides greater returns than other major financial assets such as stocks and gold, he explained, adding, „The hard part is beating Bitcoin.

Estes created Off The Chain Capital in 2016 as a financial fund open only to his friends and family. Several years later, the fund began allowing other members of the public to invest, Estes explained. „Now we have more than 90 partners in the fund,“ he said. „The reason I decided to open the fund to outside investors was because I finally figured out how to beat Bitcoin.

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The Strategy

CT: Can you explain how the background works? Like what’s in the background and what’s your mentality about it?

BE: What I’ve found is that the best way to beat Bitcoin is to buy Bitcoin below what other people might buy or sell Bitcoin above what the spot market is. We find ways to buy Bitcoin at a discount, and we find ways to buy Bitcoin at spot prices and then sell it over to people who are willing to pay us a premium for Bitcoin, and that’s pretty much all we do in the background. So we’re a valuable investor in Bitcoin and blockchain assets.

CT: When you’re buying below and selling above, are you talking more about long term action or are you talking about short plays?

BE: We don’t trade. Our average holding period is over 12 months, so we’re not traders. We don’t use leverage. We’re not leveraging the portfolio to beat Bitcoin. We use a traditional method, Graham-Dodd, Warren Buffett to buy Bitcoin at a low price.

We’re one of the world’s largest buyers of Mt. Gox bankruptcy claims. So when you buy a Mt. Gox bankruptcy claim from people who have a claim on the company, our average cost is about $1,000 per claim, and we’re getting almost $3,000 in assets.

Those assets within a claim are 0.1785 Bitcoin, 0.18 Bitcoin Cash and there’s about $784 of cash there, in foreign currency. When you add all that up, there’s about $3,000 worth. As I said, our average cost is about $1,000. These claims will eventually be paid over the next few years, and when they’re paid, even if Bitcoin doesn’t move, we almost triple our money because we’re buying this Bitcoin at a discount through these claims.

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The legacy of Mt. Gox continues

Mt. Gox started as one of the first Bitcoin exchanges. The market worked from 2010 to 2014, finally ending in a disaster. The exchange suffered a notorious hacking in which it was reported that some criminals stole some 850,000 BTCs, which led to the disappearance of the exchange in 2014.

We are rapidly advancing to 2020, and authorities are still sorting through the rubble and aftermath of the affair. Part of the process has seen victims who lost funds due to the Mt. Gox problem file claims for compensation. Entities such as Off The Chain Capital are seeking to buy these claims for benefits, albeit in the form of delayed gratification.

Essentially, due to the bureaucratic procedures and legal processes surrounding Mt. Gox, these claims are not paid immediately and have suffered many delays. The Mt. Gox rehabilitation trustee, Nobuaki Kobayashi, oversees the process. The payment of the claims has suffered several delays. Kobayashi must provide the courts with a plan of action. Recently