There's a new hedge fund in the crypto market, and it's hoping to bring deep fundamental analysis to an industry known for its dizzying volatility and meme coins.
Announced Monday, Modular Capital has raised $20 million from a wide range of investors, including Multicoin Capital, ParaFi Capital and FTX's LedgerPrime. Other backers include CMS Holdings' Bobby Cho, STEPN's Chief Revenue Officer Mable Jiang and the CEO of Altimeter Capital, Brad Gerstner.
The firm is led by James Ho and Vincent Jow. Ho previously held positions at Altimeter as well as at quant investment giant DE Shaw. Jow previously worked at New York-based Holocene Advisors.
Modular is entering the market amid a slump in cryptocurrencies, which the firm eyes as an opportunity to buy — at cheap prices — tokens that are durable and will have staying power over the next one to three years.
"We are ready to pounce," Ho said in an interview with The Block.
The firm plans to learn from the lessons of the market, which has seen countless hedge funds blow up during different cycles. Ho said the firm plans to avoid using leverage, thinking that the company can "generate incredible returns without any leverage." It will also take counter-party risk management seriously with "the vast majority of our assets being stored with incredibly safe custodians."
As for how it will invest, the company plans to use various metrics to make bets based on the underlying fundamentals of a given crypto asset, versus moving in and out of cryptos quickly.
"The most important metrics depends on each protocol," Ho said. "But there's exchange trading volumes, staking protocol, market share."
The lack of standardization is Ho's opportunity.
"It's up to us to come up with the relative metrics."
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