Summary:
Pythagoras Alpha Long Biased Strategy achieved a 204% return in 2024, outperforming Bitcoin's 121% gain.
The strategy combines a BTC base position with two uncorrelated strategies for higher returns.
Utilizes machine learning and AI-based models for dynamic market exposure.
The fund's AUM grew to over $230 million as the bullish market attracted investors.
Pythagoras expects continued bullish trends driven by regulatory support and corporate demand.
This Crypto Fund Blew Past Bitcoin's 121% Price Gain in 2024
Bitcoin (BTC), the leading cryptocurrency by market value, surged 121% last year, crossing the six-figure mark and outshining traditional assets. However, this performance falls short in comparison to Pythagoras Investment Management’s Alpha Long Biased Strategy, which pushed the envelope even further.
The fund, which combines a BTC base position with two uncorrelated strategies, achieved an impressive return of 204% in 2024, according to Pythagoras in an email to CoinDesk. This translates to a 3x gain, significantly outperforming the 2x return typical buy-and-hold Bitcoin investors would have realized. Notably, the fund charges an incentive fee only when it outperforms Bitcoin.
The fund's base position in Bitcoin provides direct exposure to long-term appreciation, while the two uncorrelated strategies – a momentum market timing strategy and a long-short market selection strategy – generate alpha.
The momentum strategy employs machine learning and pattern recognition to dynamically adjust and optimize exposure, allowing it to capture short-term market fluctuations. Meanwhile, the long-short strategy utilizes a proprietary AI-based forecasting model to create a dollar-neutral portfolio, investing in tokens expected to yield superior returns while shorting those anticipated to underperform.
Despite its stellar performance, the Alpha Long Biased Strategy was Pythagoras' smallest fund, with assets under management (AUM) of $7 million. It suffered a 2% drawdown in December, as Bitcoin fell from record highs above $108,000 to $93,000.
In contrast, Pythagoras' Arbitrage strategy delivered a 3% return in December, ending the year with an 18% gain and $45 million in AUM. The Quant Long Short Fund generated a 30% return in 2024, while the Absolute Return Strategy gathered $158 million in client funds with a 41.7% return. The combined AUM of the four funds grew to over $230 million from $80 million in 2023, driven by a bullish market.
Bullish Outlook
Pythagoras expects the bull market to continue this year, driven by positive regulatory developments in the U.S. and corporate demand for Bitcoin.
"The incoming Trump administration, with its proposal on creating a national strategic Bitcoin reserve and appointing individuals favorable to our industry, is expected to be a major catalyst. With over 290 members of Congress who are pro-crypto, we anticipate that supportive legislation for the cryptocurrency industry will gain momentum," said Mitchell Dong, CEO of Pythagoras.
As the U.S. Congress explores the idea of a national strategic Bitcoin reserve, Pythagoras anticipates some countries may try to front-run the U.S. in accumulating Bitcoin, should this initiative materialize. Dong also mentioned the likelihood of more companies following MicroStrategy's lead in adopting BTC.
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