Defying Corona Crash, BlockTower Fund Stretches 30% Return to 73%

BlockTower Capital's hedge fund of cryptocurrencies was trudging along.

The fund - loaded at its August 2017 inception with $140 million in assets - has returned 33% in just the first four months of 2020, two BlockTower investors said.

The fund trailed bitcoin, which gained 217%.Before this year, the fund rounded out a respectable if less spectacular 30% lifetime return for investors, according to a return sheet reviewed by CoinDesk, matching the S&P 500 but underperforming bitcoin's 162% gains.

The fund swelled 254.5% in 2017, lagging behind the mean return that year of 1,708.5% for crypto hedge funds but surpassing the 8.4% achieved by regular hedge funds, according to Eurekahedge data.

In 2018, the BlockTower fund's holdings contracted 62.8%, compared to losses of 71.8% at Eurekahedge-indexed crypto hedge funds and 3.8% for other hedge funds.

Bitcoin fell 72.6%.Finally, last year, the BlockTower fund rebounded 12% versus a Eurekahedge average 15.6% return for crypto hedge funds and 8.7% for regular hedge funds.

Bitcoin outperformed them all, climbing 88.2%.How did BlockTower Capital stage a roaring comeback in the throes of an economically ruinous global pandemic? The firm declined to comment on the record, but another source familiar with BlockTower said, without going into exact strategic calls, that the hedge fund has been deploying spot, derivatives and algorithmic trades to capture returns from extreme movements, market dislocations and sudden volatility like the recent market upheaval.

Beyond bitcoin, on which BlockTower lost $1 million over missed call options that bet the price would soar to $50,000, the hedge fund trades multiple liquid and illiquid cryptocurrencies, according to the return sheet.

BlockTower was co-founded by Goldman Sachs vice president Matthew Goetz, BlockTower's chief executive officer, and Susquehanna Investment Group trader and University of Chicago endowment fund manager Ari Paul, BlockTower's chief investment officer.

BlockTower Capital's lock-up periods are tall asks next to the quarterly redemption schedules of Polychain Capital's crypto-asset hedge fund, which trades bitcoin, and Pantera Capital's alternative coin hedge funds, which don't.