As crypto markets roar back, alumni from a major trading firm have launched their own crypto hedge fund, Split Capital.
With a focus on liquid tokens, according to cofounder Zaheer Ebtikar, Split Capital will employ a “long-biased” strategy, meaning long-term prices will be expected to rise alongside an active management approach.
Investors include the venture fund Novi Loren, the digital asset fund UTXO Management, and Dan Matuszewski, who’s the cofounder of the digital asset fund CMS Holdings. Ebtikar declined to provide the fund’s size due to regulatory restrictions.
Arguing that the middle 80% of the token market often gets overlooked because of short-term incentives, Ebtikar told Fortune that Split Capital aims to support crypto projects on longer time frames and help build out the ecosystem.
“Once assets become liquid, they just no longer get any love—and VCs move on to the next thing,” Ebtikar said. “We want to be much more founder-aligned.”
Courtesy of Split Capital
‘The shiny new thing’
Before starting Split Capital, Ebtikar worked as a portfolio manager at LedgerPrime, a trading firm acquired by FTX in 2021 that changed its structure to operate under the umbrella of Alameda and FTX’s U.S. subsidiary. Although LedgerPrime planned to refund outside investors and transition into a family fund in 2022, it became tangled up in FTX’s ensuing bankruptcy after the Sam Bankman-Fried-run crypto empire collapsed in November 2022.
“We did everything right, in our power—just wrong place, wrong time,” Ebtikar said. “So we did have a bit of a chip on our shoulders to make things right.”
LedgerPrime alum Michael Churchouse and Nai Boonkongkird, who has a Ph.D. in astrophysics from Sorbonne University, joined Ebtikar in founding Split Capital. Shiliang Tang, the former chief investment officer at LedgerPrime, is serving as an advisor.
From Split’s vantage point, the unique incentive structure of crypto venture capital harms the overall marketplace. Unlike traditional VCs, crypto VC firms often have shorter time horizons due to the liquid nature of token investing. Through investment vehicles like SAFTs, VCs can receive the promise of future tokens instead of traditional equity, which in turn might unlock one to two years after an initial investment, as opposed to waiting several years longer for a company to be acquired or go public.
“The overwhelming majority of the capital in crypto is venture money,” said Ebtikar. “Their mandate is, ‘Buy the new shiny thing early, evangelize it, and then sell it at a premium to retail.’”
Bigger venture firms such as a16z Crypto and Haun Ventures push back on that critique, arguing that they support projects over the long term, but the space remains rife with venture firms that operate more like hedge funds. According to Bloomberg, crypto hedge funds lost an average of 52% in 2022, although they returned over 40% in 2023.
Ebtikar said that by investing in less-popular tokens, Split can both find undervalued investments and drive growth of the ecosystem, where currently too much market value of a project’s token is tied to speculation, not the project’s underlying value.
The U.S.-based Split, which launched earlier this month, is registered with the Commodity Futures Trading Commission—a requirement because it trades derivatives to hedge investments.
“We have this thesis that in the long run, we can’t just keep making new tokens and pumping those out and having those exist without crypto folding in on itself,” Ebtikar said. “Gambling is not a multitrillion-dollar [total addressable market].”
