Kieran Gibbs is converting his pay into Bitcoin
Athlete Kieran Gibbs commits to converting half of his salary into bitcoin through the world leader in cryptofinance.
XBTO, a global, institutional cryptofinance market maker and asset manager, announced a partnership with Inter Miami CF star Kieran Gibbs as the official facilitator converting 50 percent of Gibbs’ annual salary into bitcoin while strategically leveraging XBTO to avoid conversion fees typically charged on alternate platforms.
As a world leader in cryptofinance, XBTO is equipped with the expertise and resources to effectively collaborate with Gibbs. Beginning in December 2021, half of Gibbs’ salary will be transferred to XBTO, where XBTO will convert his USD into bitcoin — without charging any conversion fees — and send the bitcoin directly to Gibbs’ hard custodial wallet. XBTO’s trading desk has extensive experience structuring and executing complex trades, with deep access to global liquidity. These capabilities are leveraged to obtain the best price even for relatively straightforward transactions. In addition, XBTO has an ESG compliant mining operation utilizing hydroelectric power which gives direct access to freshly mined coins.
This progressive deal establishes Gibbs as the first US-Based Major League Soccer player, and first Inter Miami player, to publicly announce the transfer of a portion of his salary into crypto.
“I’ve been a fan of bitcoin and the crypto space for some time now, and I believe they have the ability to break down huge social and economic barriers — crypto is for everyone,” said Gibbs. “I hope my partnership with XBTO can further the awareness and education of cryptocurrencies and their tremendous potential to positively impact global societies.”
Earlier this year, XBTO established itself as the first cryptofinance firm to partner with an MLS team, where it signed the largest sponsorship deal in league history with Inter Miami. This continues XBTO’s history of innovation in the cryptofinance space, being one of the first companies to provide institutional-grade liquidity to the world’s largest crypto exchanges and institutions. Furthermore, in 2019 XBTO and cryptofinance fund Galaxy Digital carried out the first-ever block trade of a bitcoin futures contract on Bakkt, the bitcoin futures platform launched by NYSE parent InterContinental Exchange. These contracts were subsequently physically settled which was the first instance of physical delivery of a digital asset under existing U.S. commodity futures laws and regulations.
“Some struggle to see that crypto is a new asset class that is here to stay and that it can unlock remarkable opportunities, so we’re pleased to work with Kieran who is bringing attention to the incredible utility of crypto assets,” said Philippe Bekhazi, CEO of XBTO. “As someone with a massive platform of trusted fans and followers, we’re excited to help Kieran show the soccer community that engaging with bitcoin is a legitimate, and often superior, way of receiving value.”
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The full breakdown
In our first article, "Navigating Crypto Volatility: The Advantages of Active Management," we explored how the high volatility and low correlation of digital assets with traditional asset classes create unique opportunities for active managers. We discussed how these characteristics enable active managers to execute tactical trading strategies, capitalizing on short-term price movements and market inefficiencies. Building on that foundation, we now turn our attention to the unique market microstructure of digital assets.
Conducive market microstructure of digital assets
The market microstructure of digital assets - a framework that defines how crypto trades are conducted, including order execution, price formation, and market interactions - sets the stage for active management to thrive. This unique ecosystem, characterized by its continuous trading hours, diverse trading venues, and substantial market liquidity, offers several advantages for active management, providing a fertile ground for sophisticated investment strategies.
24/7/365 market access
One of the defining characteristics of digital asset markets is their continuous, round-the-clock operation.
Unlike traditional financial markets that operate within specific hours, cryptocurrency markets are open 24 hours a day, seven days a week, all year round. This continuous trading capability is particularly advantageous for active managers for several reasons:
- Immediate response to market events: Unlike traditional markets that close after regular trading hours, digital asset markets allow managers to react immediately to breaking news or events that could impact asset prices. For instance, if a significant economic policy change occurs over the weekend, managers can adjust their positions in real-time without waiting for markets to open.
- Managing volatility: Continuous trading provides more opportunities to capitalize on price movements and volatility. Active managers can take advantage of this by implementing strategies such as short-term trading or hedging to mitigate risks and lock in gains whenever market conditions change. For instance, if there’s a sudden drop in the price of Bitcoin, managers can quickly sell their holdings to minimize losses or buy in to capitalize on the lower prices.
Variety of trading venues
The proliferation and variety of trading venues is another crucial element of the digital asset market structure. The extensive landscape of over 200 centralized exchanges (CEX) and more than 500 decentralized exchanges (DEX) offers a wide array of platforms for cryptocurrency trading. This diversity is beneficial for active managers in several ways:
- Risk management and diversification: By spreading trades across various exchanges, active managers can mitigate counterparty risk associated with any single platform. Additionally, the ability to trade on both CEX and DEX platforms allows managers to diversify their strategies, incorporating different levels of decentralization, regulatory environments, and security features.
- Arbitrage opportunities: Different venues often exhibit price discrepancies, presenting arbitrage opportunities. For example, managers can buy an asset on one exchange at a lower price and sell it on another where the price is higher, thus generating risk-free profits.
- Access to diverse liquidity pools: Multiple trading venues provide access to diverse liquidity pools, ensuring that managers can execute large trades without significantly impacting the market price.
Spot and derivatives markets (Variety of instruments)
The seamless integration of spot and derivatives markets within the digital asset space presents a considerable advantage for active managers. With substantial liquidity in both markets, they can implement sophisticated trading strategies and manage risk more effectively.
For instance, as of August 8 2024, Bitcoin (BTC) boasts a daily spot trading volume of $40.44 billion and an open interest in futures of $27.75 billion. Additionally, derivatives such as futures, options, and perpetual contracts enable managers to hedge positions, leverage trades, and employ complex strategies that can amplify returns.
Overall, the benefits for active managers include:
- Hedging and risk management: Derivatives offer a powerful tool for hedging against unfavorable price movements, enabling more efficient risk management. For instance, a manager holding a substantial amount of Bitcoin in the spot market can use Bitcoin futures contracts to safeguard against potential price drops, thereby enhancing risk control.
- Access to leverage: Managers can use derivatives to leverage their positions, amplifying potential returns while maintaining control over risk exposure. For instance, by employing options, a manager can gain exposure to an underlying asset with only a fraction of the capital needed for a direct spot purchase, thereby enabling more capital-efficient investment strategies.
- Strategic flexibility: By integrating spot and derivatives markets, managers can implement sophisticated strategies designed to capitalize on diverse market conditions. For instance, they may engage in volatility selling, where options are sold to generate income from market volatility, regardless of price direction. Additionally, managers can leverage favorable funding rates in perpetual futures markets to enhance yield generation. Basis trading, another strategy, involves taking offsetting positions in spot and futures markets to profit from price differentials, enabling returns that are independent of market movements.
Exploiting market inefficiencies
Digital asset markets, being relatively nascent, are less efficient compared to traditional financial markets. These inefficiencies arise from various factors, including regulatory differences, market segmentation, and varying levels of market maturity. For example:
- Pricing anomalies: Phenomena like the "Kimchi premium," where cryptocurrency prices in South Korea trade at a premium compared to other markets, create arbitrage opportunities. Managers can exploit these by buying assets in one market and selling them in another at a higher price.
- Exploiting mispricings: Active managers can identify and capitalize on mispricings caused by market inefficiencies, using strategies such as statistical arbitrage and mean reversion.
The unique aspects of the digital asset market structure create an exceptionally conducive environment for active management. Continuous trading hours and diverse venues provide the flexibility to react quickly to market changes, ensuring timely execution of trades. The availability of both spot and derivatives markets supports a wide range of sophisticated trading strategies, from hedging to leveraging positions. Market inefficiencies and pricing anomalies offer numerous opportunities for generating alpha, making active management particularly effective in the digital asset space. Furthermore, the ability to hedge and manage risk through derivatives, along with exploiting uncorrelated performance, enhances portfolio resilience and stability.
In our next article, we'll delve into the various techniques active managers employ in the digital asset markets, showcasing real-world use cases.
