Cryptoverse: The funds making moolah from the messy markets amid inflation

business-standard.com:

The crypto market's a hot mess, leaving many investors struggling to turn a buck. Enter the arbitrageurs.

Bitcoin and other cryptocurrencies have either been shackled to ranges or in decline since January, leaving your regular buy-and-hold investor with little option but to sell or to wait for the elusive rally.

One class of seasoned investors is faring better, though: the arbitrageurs, players such as hedge funds who thrive on exploiting price differences between different geographies and exchanges.

"In May when the market collapsed, we made money. We are up 40 basis points for the month," said Anatoly Crachilov, co-founder and CEO of Nickel Digital Asset Management in London, referring to their arbitrage strategy.

"Arb trading" involves buying an asset in a cheaper venue and simultaneously selling it elsewhere where it's quoted at a premium, in theory pocketing the difference while being neutral on the asset.

It's certainly not for everyone, and requires the kind of access to multiple markets and exchanges, and often the algorithms, that only serious players like sophisticated hedge funds can secure to make it a profitable endeavour.

Yet for investors who meet the bar, it's proving attractive.

Such "market neutral" funds have become the most common strategy among crypto hedge funds, making up nearly a third of all currently active crypto funds, according to PwC's annual global crypto hedge fund report published last week.

K2 Trading Partners said its high-frequency trading crypto arbitrage fund, which is algorithmically driven, had returned about 1% this year through to the end of May, even as bitcoin slumped 31% in the same period.

Meanwhile Stack Funds' long/short trading fund with exposure in liquid