- Thomas Puech is the chief executive of crypto hedge fund Indigo, which manages $15 million.
- He shares his three-part strategy, including listed tokens, DeFi protocols, and metaverse projects.
- He also lays out three altcoins of projects that he has committed capital to and is bullish on.
Thomas Puech knew that the crypto market was in a bearish trend but that did not stop him from launching his hedge fund in February this year.
“What bearish means in 2022 is not the crypto winter like we had in 2018,” Puech told Insider in an interview. “We have had so many big influential companies that jumped into the game that the impact of bearish markets will be smaller and smaller.”
Most recently, Goldman Sachs made history by becoming the first major US bank to trade a non-deliverable option with crypto merchant bank Galaxy Digital. Billionaire investor Ray Dalio’s Bridgewater Associates, the world’s largest hedge fund, is reportedly planning to back a crypto fund for the first time.
The entry of heavyweight institutional investors into the crypto space is a bullish indicator, but the macro backdrop of the Russia-Ukraine war, inflation risks, and potential policy errors of an aggressive
Federal Reserve
will continue to weigh on the digital assets space, in Puech’s view.
“For now, it’s a time of uncertainty,” he said, “but I still reckon that the market will drop a bit more before rising in the coming year.”
His hedge fund, named Indigo, aims to take advantage of the current downdraft to invest in blue-chip tokens, high-yielding decentralized finance protocols, as well as non-fungible token and metaverse projects.
Breaking down his strategy
To increase the odds for maximum returns, Puech said he devised the strategy to allocate 50% of the portfolio to long-term token holdings, 20% to DeFi protocols, and 30% to metaverse and NFT projects.
Instead of simply buying the top 30 cryptocurrencies by
market cap
or scouring the entire universe of thousands of tokens for hidden gems, Puech and his team assess the strength of the blockchain layers first before investing in the projects built on top of the network.
“For example, if we are going to invest in the ATOM token, then we are going to invest in the entire ecosystem of Cosmos,” he said, referring to the proof-of-stake blockchain powered by the ATOM cryptocurrency.
Bitcoin (BTC), ethereum (ETH), and terra (LUNA) are among some of the long-term holdings in the portfolio, which Puech expects to produce around 30% in annual return.
To generate additional profits, the hedge fund will also engage in decentralized lending, staking, and yield farming opportunities on automated market makers. On the metaverse and NFT front, Puech said the team will not only acquire tokens of high-quality projects but also take advantage of NFT-collateralized loans and the boom around metaverse land purchases.
Although it is hard to get into the early rounds of trustworthy projects due to investor enthusiasm for emerging crypto investments, Puech said he was able to access these opportunities by leveraging his hedge fund and crypto
liquidity
background to help these protocols secure insurance, custody solutions, and crypto-friendly bank accounts.
“The average ticket that those big companies can give us is between $50,000 to $250,000, so if you want to be an investor, you can’t be simply a passive investor,” he said. “You have to be active inside the projects and push them forward.”
To be sure, the fund has a minimum investment of $250,000 and a lockup period of 24 months in addition to the standard hefty 2 and 20 hedge fund fee structure.
3 altcoins he’s bullish on
While the general interest in NFT has cooled as trading volumes plunged in recent weeks, Puech believes that NFTs will have another bull run later this year, especially if Coinbase and Instagram launch their long-promised NFT platforms to a wider audience. Above all, he is bullish on NFTs that are enabling the growth of the metaverse.
One of the tokens tapping the interconnected growth dynamic is the sandbox (SAND), which Puech likens to “a decentralized Minecraft.” The metaverse token surged 487% in the past year on the back of Facebook’s pivot to the metaverse and amid a broad-based crypto
bull market
. In addition to the token exposure, his fund also owns land NFTs in the sandbox metaverse, which can generate more profits by renting to fashion brands, other vendors, and advertisers.
Another token operating at the intersection of NFTs and the metaverse is called dropp (DROPP), which is somewhat similar to a decentralized Pokemon Go. Users of the platform can meet up in a physical location in order to mint NFTs using augmented reality technology. However, the DROPP token, which has a total supply of 500 million, has not been sold to the public yet and is therefore not listed on crypto exchanges, according to its whitepaper.
Puech also likes aurory (AURY), a Japanese play-to-earn game built on the solana blockchain. Much like players of the popular play-to-earn game Axie Infinity, users earn token rewards and in-game items by completing requests, defeating enemies, and competing with other players using creatures called “Nefties,” which are designed as NFTs.
The AURY token, which retreated 6.9% in the past month, was trading at $8.09 as of early Wednesday afternoon, according to CoinGecko pricing. Puech was able to scoop up the token for $0.2 in July, giving him a return on investment of 6,814% as of January 5, according to a pitch deck viewed by Insider.