Frequently Asked Questions

At Two Prime, many of our clients are first-time investors in digital assets. We encounter many of the same questions, from corporate treasuries to family offices to high net worth individuals.

At what price points have your investors come in, and are you planning on continuing to raise capital along with the upswing?

 

We accept investment every month. Investors have entered from as early as ~$6,000 per  BTC to as recent as ~$48,000 per BTC this month. We will continue to accept investment on a rolling monthly basis. 

What’s your AUM + fee structure?

 

AUM over $100MM (as of March 2021). The fee Structure is 2/20.

What are the main reasons people have said yes to you / no to you?

 

Yes: Experienced team, industry relationships for added Alpha, equity markets, derivatives trading backgrounds, track record established in nascent crypto derivatives markets, an interest in protecting existing crypto holdings.

No: Some institutional investors can’t invest in crypto or have a mandate for only BTC exposure. General confusion and lack of education around crypto markets. Liquidity issues with our 1-year lock-up. 

Do you have any indicators for identifying the start of the next major crypto drawdown?  

 

The fund uses a combination of standard deviation movement, cross-asset correlation, and stock-to-flow as risk indicators. Some background here: 

https://twoprime.io/insights/were-in-a-bitcoin-bull-market-but-when-will-it-end

How much of a drawdown are you expecting to protect against when the next bear market comes?

 

Two Prime offers an actively-managed BTC and ETH long fund, focusing on wealth preservation and a secondary focus on growth. This is intelligent exposure to crypto. There are no other hedge funds that do what we do right now.

The fund actively manages hedge protection and rebalances across BTC and ETH every quarter.

The Two Prime team has extensive experience and expertise developing derivatives, futures, and equity strategies for a volatility-focused hedge fund.

Two Prime buys BTC and ETH and trades BTC and ETH derivatives to hedge downside volatility and generate additional vega by selling out of the money put and call options and keeping the premiums. 

Two Prime BTC and ETH hedges are maintained within an operating delta range of 50% – 90% and adjusted based on market movements of 1σ  across the week and monthly time horizons as well as fund returns.

Two Prime maintains left tail skew protection at all times of at least a 50% hedge via a long put, while short call credits are used to finance and offset put debits.

Also, Two Prime lends bitcoin to other large funds at an 8% interest to generate an additional return for investors.

What would your investors say is the biggest reason they chose to give you their money?

 

Expertise in crypto trading from a trusted team of finance and blockchain veterans. Managing Director Alexander S Blum purchased his first Bitcoin for $9 and has been professionally involved with the industry ever since. He previously founded Atomic Capital, a digital investment group.

Our Chief Investment Officer Nathan Cox previously served as CIO with Prana Capital Group, where he developed and managed derivatives, futures, and equity strategies for the volatility-focused hedge fund. 

We also have a pioneer of open-source software on our team in Marc Fluery, Ph.D. Bitcoin and Ethereum are decentralized open-source software.

What are you benchmarking against?

 

Crypto Weighted Average Index = 50/50 BTC and ETH

See: https://docsend.com/view/u4gjcxcu3b78bat4

What is your performance (returns + Sharpe ratio) relative to just a long BTC + ETH position?

 

Monthly Sharpe Calculation Since Fund Inception (June 2020):

Two Prime Fund: 1.125

BTC: 0.898

ETH: 0.842

WAI: 0.87

For Returns See: https://docsend.com/view/u4gjcxcu3b78bat4

 

If I had simply HODLed BTC and ETH from June 2020 until now (March 2021) I would have outperformed Two Prime since fund inception, correct?

1. If you judge solely by raw returns during a bull market, then holding BTC and ETH alone would have outperformed Two Prime’s Digital Assets Fund since June 2020.

2. Two Prime’s fund is not designed to outperform these assets on the upside, but to outperform them on the downside or even when the market is flat. What is not visible in the pure returns, is the hedged protection of over 50% that has been beneath our assets the entire time, meaning our Sharpe ratio is much better than holding BTC and ETH alone.

Monthly Sharpe Calculation Since Fund Inception (June 2020):

Two Prime Digital Assets Fund: 1.125
BTC: 0.898
ETH: 0.842
WAI: 0.87

3. Historically, about 2/3rds of the time, BTC and ETH have performed flat or negative. During these extended periods, which we expect to start later this year, we will outperform BTC and ETH in raw return due to yield-earning and premium selling.

Get Started