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Introduction to Wealth Management Strategy Providers

Introduction to Wealth Management Strategy Providers

2023-12-08 | 5m

Where do trades take place?

1. Strategy providers trade on the Bitget exchange and via Copper custodial accounts.
2. Users' funds are held in the custodian account controlled by Bitget throughout the entire process. Strategy providers, operating through corresponding sub-accounts, have permissions solely for trading, with no ability to make withdrawals or transfers.

About the team

Established in 2018, the team has positioned itself as one of the largest digital currency capital management teams in the industry. Its members are alumni of prestigious institutions such as CMU, Peking University, Tsinghua University, and Shanghai Jiaotong University. They bring extensive experience from exchanges, traditional private equity firms, and the Internet sector. Focusing on quantitative development and asset management within the digital currency m arket, they provide a comprehensive range of strategies, including arbitrage, CTA, and high-frequency trading. These strategies cater to a diverse clientele, including exchanges, lending institutions, OTC merchants, traditional financial institutions, family offices, primary funds, and more.

Arbitrage strategy

The team primarily employs the following three pure market-neutral strategies with no risk exposure:
1. Funding rate arbitrage: When the funding rate is positive, the strategy goes long on spot and short on futures. Conversely, when the funding rate is negative, it utilizes leverage to sell short on spot and go long on futures. These two positions are of equal size but in opposite directions. The arbitrage profit is derived from the funding fees paid by the long futures positions or short futures positions to each other.
2. Arbitrage between spot and futures: The strategy takes advantage of price differences between delivery futures, perpetual futures, and spot trading. The arbitrage is conducted by opening positions when the price difference expands and closing positions when the price difference narrows. It aims to capture profits as the price difference between futures and spot trading eventually converges.
3. Cross-exchange arbitrage: Due to the price discrepancies in futures/spot trading and variations in futures funding rates across multiple exchanges, it becomes possible to capitalize on cross-exchange arbitrage opportunities by shorting on one side and longing on the other.

Portfolio profile

Pure risk-neutral strategy with intraday drawdown of less than 0.5%. It yields higher returns during active market and lower returns during sluggish market conditions.

Risk management mechanisms

1. Carefully selected trading assets: Only coins with high liquidity and a healthy position structure are selected to avoid impact costs and market manipulation.
2. Strict position control: The size of single-currency positions is kept under a specific threshold to avoid excessive volatility in individual currencies due to rapid market changes.
3. Full hedging: All positions are fully delta-neutral, unaffected by broad market or currency-specific price changes.
4. Low leverage: The leverage is controlled under 2X and real-time monitoring of the margin ratio and MMR is conducted to strictly control liquidation risks.

Strategy PnL performance

Strategy launch: 2018
Strategy type: Market-neutral arbitrage
Historical APR and Sharpe ratio: The average APR stands at approximately 38%, while the Sharpe ratio ranges between 6 and 10.
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Maximum drawdown: 0.6%
Strategy currency: USDT