Article Author: Geometry Capital

Source: Geometry Capital

On an early autumn evening, the gentle breeze at the top of Victoria Peak brushed against Leo's face. He stood quietly on the observation deck, gazing across the bustling Victoria Harbour, looking at the distant lights. As one of the founders of Geometry Capital, Leo was contemplating two crucial questions: Should they establish and develop their business in Hong Kong to keep up with the global compliance trend?

Hong Kong, an international financial center, is undergoing unprecedented changes. The tense geopolitical situation, slowing economic growth, and tightening liquidity have turned the Hong Kong capital market into a quagmire. However, in such an environment, Geometry Capital has stood out with remarkable achievements.

Breakthrough from Zero to One

On May 20, 2024, Geometry Capital (Hong Kong) Limited (the Hong Kong subsidiary of Geometry Capital, hereinafter referred to as "Geometry Capital (Hong Kong)") officially obtained the Type 4 (advising on securities) and Type 9 (asset management) licenses issued by the Hong Kong Securities and Futures Commission, marking a solid step for this young company in the Hong Kong market. The core team of Geometry Capital (Hong Kong) consists of seven Chinese professionals, including experienced local talents from Hong Kong and outstanding financial experts from the mainland. With a low-key, professional, and pragmatic attitude, they are ready to embrace new challenges.

Geometry Capital's performance is impressive: within 22 months, with no leverage, the average monthly return exceeded 50%, and the overall return surpassed 12 times. Such achievements caused quite a stir at a small industry exchange meeting, with many peers and attendees thinking it was a slip of the tongue. Many institutions generally expressed it in seven words: "Want stable returns, not simple." However, Leo calmly explained, "The performance is right in front of us. Although it sounds unbelievable, the numbers are indisputable."

Leo's confidence stems from his profound industry insight: once referred to as 'cryptocurrency', now hailed as 'virtual assets', the development of blockchain technology is evidently deepening and even reshaping the global financial system. Blockchain is a trust machine that can address the challenges of credit transmission inefficiencies from a higher dimension, thereby releasing enormous resources and incremental value for society. Virtual assets based on blockchain technology will be the first to carry this value, giving rise to new wealth opportunities, which has become a consensus among global investors and institutions.

Strategy and Execution: Geometry Capital's Winning Approach

Geometry Capital's success is not accidental. Before the license was officially approved, the team had already begun developing investment research strategies. They formulated a "3+2" execution strategy, which includes three offensive systems and two defensive systems.

Three Offensive Systems:

1. Value Foundation: To determine whether an asset is worth investing in, one must first assess its reasonable valuation limits, and secondly, identify which types of black swan events could have a significant impact on the asset, and then evaluate the probability of such events occurring. For the crypto industry, another point to consider is whether the asset has a risk of going to zero. Completing the above evaluations establishes the value foundation for the asset.

2. Trend Strategy: By making an overall judgment on the development trends of the crypto industry, analyze whether the market is currently in a bear or bull phase, and whether it is at the beginning or middle of a bull market. A large trend judgment is crucial for this industry, as it determines your specific execution strategy; once the macro stage of the industry is determined, combine it with relevant technical indicators at the micro level: on-chain data, stablecoin indicators, sentiment indicators, liquidation data, gas fees, etc., to trade opportunistically and follow the trend.

3. Trading Mindset: The trend trading strategy allows Geometry Capital to successfully share the profits brought by the market's own growth; to outperform the entire market, it is also essential to pay attention to all participants in the market, especially the trading methods of market makers. By standing in the market maker's perspective and understanding their trading mindset, one can find true value in this turbulent market.

Two Defensive Systems:

1. Position Control: From a risk prevention perspective, a '3+X' position control strategy is proposed, selecting three relatively independent tracks in the Web3 field and choosing the leading assets X from each track, investing funds in the aforementioned assets to achieve diversification of investment risks. In terms of fund allocation, the investment in each asset is divided into three parts: one part for the base position, used for initial investment; one part for offensive funds, which can be used to buy on dips when the market fluctuates, provided that there are no adverse changes in the fundamentals; and the last part for defensive funds, to cope with unexpected market situations.

2. Risk Quantification: After completing the above four steps, the entire trading system is about 90% complete, with the final step being setting stop-loss and take-profit levels. Based on the judgment of the asset's value foundation, reasonable stop-loss and take-profit lines are set, quantifying risk into a deterministic figure, thereby giving investors confidence and peace of mind in their investments.

Four-Step Strategy for Sustainable Growth

To achieve sustainable growth in performance, Geometry Capital has developed a "four-step" strategy:

1. Outperform M2: Outperforming M2 in the crypto market is relatively easier. Unlike traditional finance, the crypto sector is currently in the early stages of rapid development, with countless wealth opportunities, and various risk-free arbitrage strategies can yield returns that exceed M2.

2. Outperform BTC: Whether one can outperform BTC is an important test of institutional investment capability. As the ballast of the crypto market, BTC accounts for over 50% of the total market capitalization, and its performance usually reflects the overall market trend. Outperforming BTC means that institutions not only need to accurately grasp market dynamics but also need to have significant advantages in asset selection and risk management. While controlling risk, we allocate part of our positions to other mainstream coins and crypto stocks with high potential, leveraging the inherent leverage of stocks and the high returns of other coins to achieve excess returns that exceed BTC's growth.

3. Create an Unparalleled Web3 Investment Experience: The existing second-generation internet technology has provided an extremely comfortable and perfect experience in various fields such as life, work, and investment. The third-generation internet technology, represented by the cryptocurrency industry, is still in its early stages of development, and its experience is far less comfortable than that of Web2. For traditional market investors, choosing exchanges, stablecoin conversions, and private key management are all challenges they need to overcome to enter the crypto market. What we need to do is connect the Web2 and Web3 worlds, allowing investors to share Web3 wealth opportunities through crypto funds and crypto stock funds, in a 'new wine in old bottles' manner.

4. Optimize and Establish a Scientific and Effective Drawdown Control Strategy: The team has been investing significant effort in warning lines, stop-loss lines, risk warnings, and industry assessments, continuously optimizing these key measures; we will undoubtedly devote more energy to this, striving to improve performance further.

Future Outlook

Leo is confident about the future: "Existing wealth tools can only help us find the best room on the 'Titanic', but what we need is a 'Noah's Ark' that can ensure the inheritance of wealth." In Geometry Capital's view, virtual assets are not only collectibles but also hedging tools against geopolitical risks. In the future, with the arrival of the digital age, virtual assets are expected to gain recognition in broader exchange activities and may become a new global currency.

"Perhaps we do not need cryptocurrencies or virtual assets, but our descendants do. Wealth will concentrate on the 'hardest' money; wealth that does not adopt the 'hardest' money as its standard will eventually be gradually siphoned off. Investing in virtual assets is essentially a way to allocate options for the future digital age. If the digital age does not arrive, the losses are still controllable; but if it arrives as expected, the current investment is the most effective means to ensure that family wealth and status do not decline."

Geometry Capital's journey has just begun, but their starting point is already loud enough. In this ocean of opportunities and challenges, Geometry Capital will continue to sail against the wind, seeking future wealth beacons. Regardless of market fluctuations, Geometry Capital will remain true to its original intention, creating more wealth miracles for investors with a professional and focused attitude.