Crypto Hedge Fund BXB Capital: Interesting Development History

BXB Capital, or Block by Block Capital, a Singapore-based crypto hedge fund, will establish a Bitcoin-focused trading fund in July, co-founded by former Binance Korea co-founders JJ Petersen and Alex Friedberg. It intends to raise 1,000 Bitcoins and has so far raised around 400 Bitcoins.

It is expected that the fund would solely raise capital in Bitcoin, trade in Bitcoin, and give Bitcoin returns. According to a Markets Live Pulse study performed by Bloomberg last week, Bitcoin is considered a more popular safe haven than the US currency. Tether, the creator of the world’s biggest stablecoin USDT, said earlier this month that it wants to invest up to 15% of its revenues in Bitcoin on a monthly basis as it diversifies its reserves away from US government debt.

BXB Capital, known for its kimchi premium and the first Korean won-backed stablecoin, was also a partner in Binance’s bid to enter the South Korean market.

History of BXB Capital

Alexander Petersen and Alexander Friedberg launched BXB Capital in 2017. JJ Petersen has a background in trading and investing. In 2007, he became Arizona’s youngest licensed investment adviser. His knowledge of PC hardware got him a partner in Bitcoin mining operations when he entered the crypto world in early 2017.

Alexander Friedberg enjoys technology and new software. During his undergraduate studies, he co-founded two Internet start-up firms and later worked for Amazon.com, Korean e-commerce startup Coupang, and Southeast Asian online car-hailing platform Grab. He was drawn to blockchain technology and the resulting paradigm shift in product creation in early 2017. He has been active in Singapore, Korea, and Southeast Asia since establishing BXB Capital.

South Korea was particularly excited about investing in cryptocurrencies during the early days of BXB Capital, and Korean investors had a more evident herd effect. South Korea’s trade sector has long been an “isolated island” due to its severe foreign currency regulations. The Korean market often has a significant pricing gap with other markets. When there is a positive premium, it is referred to as “kimchi premium,” and when there is a negative premium, it is referred to as “reverse premium.”

Taking advantage of the “kimchi premium” phenomena, BXB Capital initiated a Bitcoin spread arbitrage operation, which included purchasing Bitcoin in the US and selling it in South Korea. In a media interview, the two creators discussed the state of kimchi premium. They claim that in 2017, they will be able to make more than $1 million USD every day. This method gained popularity when it was used by the now-defunct Three Arrows Capital and FTX’s sister company Alameda Research.

Experiment with KRWb stablecoin

BXB Capital allowed its subsidiary BXB Lnc. to launch the KRWb token based on the ERC20 protocol in South Korea at the beginning of 2019, based on the notion of stable currency backed by USDT, TUSD, and other legal currencies. A stablecoin based on the Won of South Korea. When KRWb was originally introduced, BXB announced a 400 million won initial capital deposit, which was used to mortgage the same amount of freshly minted KRWb.

According to the team’s concept, KRWb is not only pegged to Korean Won and can be used as a stable value store, but it is also able to participate in the global encrypted economy on the basis of the Korean Won denomination, making KRWb a cost-effective foreign exchange hedging product, and the price difference between South Korea and the global market will be reduced over time. Yet, the life cycle of KRWb is just 18 months from team creation to project end.

Binance bought BXB Inc. in January 2020. The two firms collaborated to develop Binance Korea and launch the Binance-branded Korean won stablecoin BKRW. The KRWb project was finally abandoned because the businesses of BKRW and KRWb do not intersect, and the operational and financial problems of sustaining two different companies, roadmaps, and activities are beyond the capability of BXB Capital. Binance Korea’s operations in South Korea are also struggling. Its token BKRW has a low use rate and a poor trading volume. Due to restricted liquidity and minimal trading activity, the exchange subsequently closed down after less than a year of existence.

Petersen said that, apart from other projects, BXB Capital continues to employ its own cash to pursue proprietary trading techniques. Although many cryptocurrency hedge funds concentrate on arbitrage and market making or on facilitating liquidity on exchanges, BXB Capital focuses on pattern detection.

It is worth noting that Binance has not abandoned the Korean market. Binance revealed in February that it had bought a controlling share in the ailing South Korean cryptocurrency exchange Gopax. The transaction was backed by the Industry Recovery Plan, a $1 billion joint investment effort coordinated by Binance. The transaction’s terms were not revealed.

New strategy with Bitcoin

By its emphasis on Bitcoin, the new fund marks BXB’s first significant venture into accepting outside funds, as well as a new operational structure.

The new fund is unique in that its limited partners (LPs) invest directly in Bitcoin, with all trading techniques and returns likewise taking place in the world’s largest cryptocurrency. Many crypto-oriented investors, according to Petersen, no longer want to keep additional dollars, therefore, they perceive the new BXB Capital fund as a unique possibility to earn in Bitcoin without relying on lending or yielding goods.

Many believers say that Bitcoin is a more secure investment than fiat currencies such as the US dollar. Bitcoin is a deflationary asset since there is a fixed limit on how much may ever be mined, as opposed to the dollar, whose monetary supply is always rising.

BXB Capital will concentrate on margin futures trading, which means it will commit collateral to establish greater bets on Bitcoin’s future price. The company is registered in the British Virgin Islands, which permits it to use crypto-trading tactics that are prohibited in the United States.

It is clear that this is a dangerous investing plan at the moment since digital assets do not yet have open rules, and hazards are disguised.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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