Crypto Quant Manager expands with new manager
Strix Leviathan, a quantitative digital asset investment firm modeled after DE Shaw and Two Sigma, has hired Matthew McBrady, formerly of the US Treasury Department and BlackRock. McBrady will lead strategy for the firm, following a recent outside investment in the business, according to an announcement Tuesday.
“We’ve gotten some resources, expanded the team and now we have the bandwidth,” McBrady said Institutional investor. “We have more people to do more work, but that now means that someone has to have more time to think about using the researchers’ energy in the right places.”
McBrady, a professor at the University of Virginia, worked as BlackRock’s multi-strategy hedge fund CIO from 2014 to 2016, before leaving for an expected political role.
The US Treasury Department alum, who had worked for the government under President Bill Clinton’s administration and had hoped to do the same in a Hillary Clinton administration, was surprised by Donald Trump’s election victory. Taking some time to decide what was next, he decided to teach classes and consult assets and startups, including Strix Leviathan.
The Seattle-based investment manager currently operates a long-only digital asset strategy and a market-neutral fund using risk arbitrage and liquidity injection strategies, each using the firm’s research to invest for clients, which are currently primarily family offices. According to McBrady, the firm plans to develop more market-neutral strategies and target larger institutions.
But before these strategies could be implemented, Strix Leviathan had to build an infrastructure to power them. In crypto markets, investors can either trade assets on exchanges such as Coinbase or Binance, or figure out a way to make trades themselves, usually by contacting a market maker. “The infrastructure is a real barrier to entry,” said Sadie Raney, founder and CEO of the firm.
According to Raney, Strix Leviathan has built software that streamlines the trade-clearing process, freeing up employees to focus on product research and development. McBrady compared the firm’s work to the way some large hedge funds focus first on technology and IT, and then on investment strategy.
“The simple explanation for DE Shaw and Two Sigma’s success is that they were founded by computer scientists,” McBrady said. “They had better infrastructure. They had better data and they could access it.”
While digital asset data is relatively accessible — after all, the nature of crypto markets is transparent — the depth of information collected by data providers is somewhat thin, according to McBrady.
Among other things, Strix Leviathan’s team collects data on transactions per block, the size of a block, prices and how many layers a layer 1 coin bridges to. While some of the coins Strix Leviathan’s team is analyzing are incredibly new, Raney said the team has developed a strategy to create synthetic months of performance using random sampling that can provide more information about how a specific currency will behave.
“There are a couple of key providers of layer-1 data,” McBrady said. “They have between two and six different nodes out there observing this information.”
Nodes are used to keep track of the distributed ledger, which tracks crypto transactions. According to McBrady, Strix Leviathan currently has 24 nodes monitoring data. The firm will use this information to build trend-following strategies that will identify imbalances in supply and demand and then trade on them.
“This is just a data-rich world, and it’s all completely transparent,” McBrady said. “There is no such thing as proprietary data, except that it is very difficult to obtain and understand.”
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