While the world of finance still revolves around fiat currency, the crypto hedge fund BXB Capital is taking a different approach with its latest fund: It's raising capital exclusively in Bitcoin, which will also be the sole instrument for its trading strategy.
In an exclusive interview with Fortune, founders J.J. Petersen and Alex Friedberg said they already have around 400 Bitcoin—worth roughly $10 million—committed from investors, with a plan to raise up to 1,000 Bitcoin and launch the fund in July.
Petersen and Friedberg got their start trading the so-called kimchi premium, a strategy that exploited cost differences between the spot price of Bitcoin in South Korea and other markets and was made famous by traders such as Three Arrows Capital and Sam Bankman-Fried’s Alameda Research.
“There weren’t many people in 2017 and 2018 who were doing things at large scale,” Petersen said. “And it put us in a lot of rooms.”
In 2019, Petersen and Friedberg launched KRWb, the first stablecoin backed by the Korean won. They also were cofounders of Binance KR, the Korean arm of the crypto exchange giant, which closed in 2020 after eight months of operation due to low trading volume.
Outside of other ventures, Petersen said BXB Capital continues to use its own capital to implement proprietary trading strategies. While many crypto hedge funds focus on arbitrage and market making, or helping facilitate liquidity on exchanges, BXB Capital focuses on pattern recognition.
The new fund represents BXB’s first major foray into taking outside capital—Petersen said the limited partners, or investors, are high-profile figures in crypto, but declined to name any—as well as a new operating structure through its foregrounding of Bitcoin.
Many acolytes argue that Bitcoin is a safer asset to hold than fiat currencies like the U.S. dollar. Because Bitcoin has a set limit on how much will ever be mined—21 million—it is a deflationary asset, unlike the dollar, whose monetary supply is constantly expanding.
“You basically need to earn [more] dollars to outpace inflation,” Petersen said. “If you earn more Bitcoin, you just own your token, so you increase your total percentage of the circulating supply permanently.”
The fund takes a unique approach by having its LPs invest directly with Bitcoin, with all trading strategies and returns also in Bitcoin. Petersen said that many crypto native investors do not want to hold more dollars, so the new fund allows them the opportunity to earn in Bitcoin without having to engage in lending or yield products.
BXB Capital will focus on margin futures trading, meaning it will commit collateral to open larger positions on the future price of Bitcoin. The firm is registered in the British Virgin Islands, which allows it to employ crypto-trading strategies that are restricted in the U.S.
“There are very few funds that look at Bitcoin as the asset you want to make more of,” Petersen said. “People are starting to change their framework and are no longer trying to just acquire more wealth in USD or fiat.”
