TYR Capital Partners Arbitrage and Crypto “In Kind” Subscriptions

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As Crypto becomes a more accessible/mainstream asset class an increasing number of market participants find themselves with a significant number of crypto inventory in their portfolios. TYR Capital Partners has identified three main actors with such allocations:

  1. Crypto Exchanges that hold an inventory of cryptocurrencies as part of their treasury. This inventory is often quite substantial since most of these venues are unregulated and don’t have license to handle “fiat” currencies.
  2. Companies that offer deposit accounts in cryptocurrencies. These resemble traditional commercial banks that offer interest earning accounts to holders of cryptocurrencies such as Bitcoin. Over the last couple of years, such crypto deposit accounts have attracted a substantial amount of crypto.
  3. Portfolio managers who are including cryptocurrencies such as Bitcoin in their “traditional” portfolios looking to take advantage of crypto as a potentially uncorrelated and appreciating asset. These coins are normally part of a “buy and hold” allocation that is often kept with a third party custodian.

What unites the above market participants is the decision to have outright exposure to cryptocurrencies such as Bitcoin over the medium to long term.

TYR Capital Partners Arbitrage, on the other hand, is a relative value/alpha crypto hedge fund that has delivered an incredibly stable performance since its inception in 2019 and very high risk adjusted returns. To counter parties such as the ones mentioned above that stable performance is seen as a yield enhancement opportunity. In other words, market participants with coin inventory would look at a strategy like TYR Arbitrage as a way to earn extra yield on their inventory at relatively low risk. There is, however, one catch: in order for the strategy to work as a yield enhancer these market participants would need to subscribe to the fund with their crypto holdings. That way they can maintain the outright exposure to crypto and complement it by adding the relative value/arbitrage layer from TYR Capital.

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