May 2025
The crypto sector performed well in May, defying its typical “sell-off” pattern from previous years. Our funds benefitted from the positive trend, with the Digital Fund posting a gain of 14.88% and Alpha Prime Trust gaining approximately 0.73%. Our long-only strategy, Digital Fund, captured the strong rebound in Ethereum, which rose by 43.77% to US$2,538.11. This rally followed Ethereum’s Pectra Upgrade, which we effectively utilised with the support of PierTwo. Both of our funds still delivered positive returns despite the 7.59% market pull back toward the end of the month.
Bitcoin also reached a new all-time high during the month. This contributed to favourable funding rates for our market-neutral strategy, Alpha Prime Trust. The performance aligns with the trend in gold prices, which remain near all-time highs. Investors appear to be positioning into safe-haven assets in anticipation of potential market shocks. Both Bitcoin and Gold serve as stores of value, helping preserve purchasing power during periods of uncertainty.
In contrary, the bond market experienced notable liquidity outflows this month. This may suggest that a return to risk-on sentiment is approaching. The shift is consistent with expectations that the Federal Reserve will adopt a more dovish stance in the coming months. This may support higher liquidity and stronger economic growth.t
Alpha Prime Trust
Our market-neutral strategy, Alpha Prime Trust, delivered a positive return of 0.73% in May. This was largely driven by favourable funding rates as Bitcoin reached a new all-time high during the month. When funding rates are elevated, futures market investors pay a premium to hold long positions. Our strategy is designed to capture these conditions while carefully managing risk on both sides of the trade. Despite signs of a market pullback late in the month, Alpha Prime Trust remained well-positioned and continued to generate steady performance.
In addition to our market-neutral strategy, our DeFi strategy further diversified our sources of yield. This passive approach generated a return of 0.65% in May. While the return may appear modest, it aligns with our objective of maintaining minimal risk within this portion of the portfolio.
Digital Fund
Digital Fund delivered a return of 14.88% in May as the market rebound continued. A major contributor was Ethereum, which surged by 43.77%. We took advantage of Ethereum’s Pectra Upgrade by consolidating our ETH holdings into a single validator. This strategic move allowed us to activate compounding returns, where staking rewards are automatically reinvested without the operational complexities typically associated with ETH staking. We are proud to share that Digital Fund is among the top 1% of early adopters of this upgrade.
Beyond Ethereum, our exposure to Aave also added to performance. Aave posted a strong 56.41% gain, closing the month at US$240.48. This was supported by growing demand for DeFi protocols, with Token Terminal showing that active DeFi loans have reached an all-time high of $23.7 billion. Total value locked across DeFi is also approaching pre-tariff levels, further reinforcing this upward trend.
However, the portfolio faced some drag from underperformance in Layer 2 networks. Polygon and Optimism recorded losses of 9.55% and 13.20%, respectively. This underperformance may be attributed to the persistently low gas fees on Ethereum mainnet, indicating a lack of congestion and potentially reducing the urgency for users to migrate activity to Layer 2 solutions.