Article author: Geometry Capital

Source: Geometry Capital

In the early autumn evening, the evening breeze from the top of Victoria Peak gently brushed Leo's face. He stood quietly on the observation deck, looking across the bustling Victoria Harbour and gazing at the lights in the distance. As one of the founders of Geometry Capital, Leo was thinking about two crucial questions: Should he take root and develop his business in Hong Kong to keep up with the trend of global compliance development?

Hong Kong, an international financial center, is undergoing unprecedented changes. Geopolitical tensions, economic growth slowdown, liquidity tightening and other unfavorable factors have made Hong Kong's capital market a quagmire. However, in such an environment, Geometry Capital has stood out with amazing performance.

A breakthrough from zero to one

On May 20, 2024, Geometry Capital (Hong Kong) Co., Ltd. (Geometry Capital's Hong Kong subsidiary, 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 Regulatory Commission, marking a solid step for this young company in the Hong Kong market. The core team of Geometry Capital (Hong Kong) consists of 7 Chinese people, including both experienced local professionals in Hong Kong and outstanding financial talents from the mainland. They are facing new challenges together with a low-key, professional and pragmatic attitude.

Geometry Capital's performance is impressive: within 22 months, without leverage, the average monthly return exceeded 50%, and the overall return exceeded 12 times. Such a performance caused quite a stir at a small industry exchange meeting, and many peers and participants thought it was a slip of the tongue. Many institutions generally said seven words: It is not easy to stabilize returns. However, Leo explained with a calm mind: "The performance is in front of us. Although it sounds unbelievable, the numbers are true."

Leo has such confidence because of his profound understanding of the industry: once known as "cryptocurrency", now known as "virtual assets", the development of blockchain technology is obviously deepening and even reshaping the global financial system. Blockchain is a trust machine that can solve the difficulties of credit non-transmission or low transmission efficiency from a higher dimension, thereby releasing huge resources and incremental value for society. Virtual assets based on blockchain technology will first carry these values, thus creating new wealth opportunities. This is already a consensus reached among global investors and institutions.

Strategy and Execution: Geometry Capital’s Winning Strategy

The success of Geometry Capital is not accidental. Before the license was officially approved, the team had already started developing investment research strategies. They formulated a "3+2" execution strategy, including three major offensive systems and two major defensive systems.

Three major offensive systems:

1. Value base: To determine whether a target is worth investing in, first you need to determine the upper and lower limits of its reasonable valuation, and then determine what type of black swan event may have a huge impact on the target, and then assess the probability of such black swan events. For the crypto industry, another point that needs attention is whether the target has the risk of zeroing out. By doing the above evaluations, you have completed the construction of the value base of the target.

2. Trend strategy: Through the overall judgment of the development trend of the crypto industry, analyze whether it is currently in a bear market or a bull market, and whether it is in the early or middle stages of a bull market. The big trend judgment is very important for this industry and determines your specific execution strategy; after determining the macro stage of the industry, combine the relevant technical indicators at the micro level: on-chain data, stable currency indicators, sentiment indicators, liquidation data, gas fees, etc., choose the right time to trade and follow the trend.

3. Trading thinking: The trend trading strategy allows Geometry Capital to successfully share the benefits brought by the market’s own growth. However, to outperform the entire market, we must also pay attention to each market participant, especially the dealer’s trading methods. Only by standing from the dealer’s perspective and understanding the dealer’s trading thinking can we find the real gold in this turbulent market.

Two major defense systems:

1. Position control: From the perspective of risk prevention, a ‘3+X’ position control strategy is proposed. Three relatively independent tracks are selected in the Web3 field, and the leading target X of each track is selected. Funds are invested in the above targets to achieve investment risk diversification. In terms of fund allocation, the investment funds for each target are divided into three parts. One is the base fund, which is used for initial position building; one is the offensive fund. When the market fluctuates, if there is no adverse change in the fundamentals, you can buy on dips to reduce the cost of holding positions; the last one is the defensive fund to deal with emergencies in the market.

2. Risk quantification: Based on the above four steps, the construction of the entire trading system has basically been completed by 90%, and the last step is to stop profit and stop loss. Based on the judgment of the value base of the benchmark, the stop profit and stop loss lines are reasonably set to quantify the risk into a deterministic data, so that investors can have a bottom line in their hearts and invest with confidence.

Four-step strategy to pursue longevity

In order to achieve sustainable growth in performance, Geometry Capital has formulated a "four-step" strategy:

1. Outperforming M2: It is relatively easy to outperform M2 in the crypto market. Unlike traditional finance, the crypto field is currently in the early stages of rapid development. It contains countless wealth opportunities, and the returns of various risk-free arbitrage strategies can outperform M2.

2. Outperforming BTC: Whether it can outperform BTC is an important test of institutional investment capabilities. As the ballast of the crypto market, BTC's market value accounts for more than 50% of the total market value, 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 target selection and risk management. On the premise of controlling risks, we allocate part of our positions in other mainstream currencies and crypto stocks with high potential, and use the leverage of stocks and the high returns of other currencies to obtain excess returns that exceed the increase in BTC, thereby achieving Outperform BTC.

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 the early stages of development, and its experience is far less comfortable than that of Web2. For investors in the traditional market, a series of issues such as exchange selection, stablecoin exchange, and private key custody are all difficult problems they need to overcome when entering the crypto market. What we have to do is to connect the Web2 and Web3 worlds, and through the "old wine in new bottles" method such as cryptocurrency funds and crypto stock funds, let investors share the wealth opportunities of Web3 with the experience of Web2.

4. Optimize and establish a scientific and effective retracement control strategy: The team has been investing a lot of energy in early warning lines, stop loss lines, risk warnings, industry research and other aspects, and continues to optimize these key measures; we will definitely devote more effort to it and pursue better performance.

Future Outlook

Leo is full of confidence in 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 pass on wealth." From the perspective of Geometry Capital, virtual assets are not only collectibles, but also hedging tools to deal with geopolitical risks. In the future, with the advent of the digital age, virtual assets are expected to be recognized in a wider range of exchange behaviors and may become a new global currency.

“Perhaps we don’t need cryptocurrencies or virtual assets, but our descendants do. Wealth will be concentrated on the ‘hardest’ money, and wealth that is not based on the ‘hardest’ money will eventually be gradually siphoned away. Investing in virtual assets is essentially an option allocation for the future digital age. If the digital age has not arrived, the losses are still controllable; but if it arrives as expected, investing now is the most effective way to ensure that the family’s wealth and status do not slip.”

Geometry Capital has just started its journey, but its starting point is loud enough. In this digital ocean full of opportunities and challenges, Geometry Capital will continue to ride the wind and waves and look for the future wealth beacon. No matter how the market fluctuates, Geometry Capital will stick to its original intention and create more wealth miracles for investors with a professional and focused attitude.