May 032018

Countinghouse is created by a group of traders with experience in the traditional Forex industry. This isn’t the first such project in crypto of course. For example, we previously wrote about TaaS when it launched, which has been managing investor money for over a year. Different teams come at this from different angles. The Countinghouse team comes at it from the Forex angle, and believes that the tools of Forex can be translated into crypto.

The team’s whitepaper claims that their algorithms backtested at 600% returns over the last 12 months, which can be misleading (back-tested results seldom mean anything and even more so in crypto) but also underperform the broader crypto market significantly. However, the question is, would investors have reason to believe that the fund would either be able to provide uncorrelated returns to the broader crypto market, or be truly a ‘hedge fund’ in that the returns come with lower risk. Otherwise, investors would be far better off with buying Bitcoin and Ethereum.

Countinghouse Fund and its Structure

The Countinghouse fund is structured to make three broad types of investments –

  • Crypto algorithmic trading (60% of the total fund)
  • Arbitrage strategies (30% of the total fund)
  • Passive investments (e.g. ICOs)

These seem quite reasonable, especially in a market that can be quite inefficient like crypto. For example, most savvy crypto investors would have noticed and taken advantage of price arbitrage among different exchanges. This happens quite regularly, especially among geographically distinct exchanges that trade fiat pairs. More recently, we’ve seen the price of Bitcoin on Korean exchanges go significantly higher than the US and European exchanges. Thus, a strategy like arbitrage makes sense for crypto. The returns might diminish as more players enter the market though.

ICO and Fundraising

Countinghouse is also creating or seeding its fund with the help of an ICO. The usual advantages to investors apply, i.e. better liquidity and lower barriers to entry, either due to geographic restrictions or other regulatory requirements. In general, investors also have the ability to make smaller investments. The funds raised in the ICO would be used to trade the markets based on the distribution of strategies described above.

The investment targets described by the team are ambitious, to say the least. For example the team describes a target of 1000% return on the ICO price, which any serious investor should take with a grain of salt. However, the strategies tend to do well in volatile markets if done competently. There could be uncorrelated gains to be had with good execution of the trading strategies, given the general market volatility of crypto.

The tokens themselves are plain ERC20 tokens on Ethereum. This means if exchanges decide to list these tokens, you can start trading them. Alternately, newer decentralized exchanges like 0x may be used if centralized exchanges want to stay away from security tokens.

If you want to learn more, check out the Clearinghouse website and the whitepaper. Remember that these are extremely risky investments and you can lose all your money. Never invest more than you’re willing to lose.

Photo Credit: Flickr

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