With the US election just a week away, markets are bracing for increased volatility, and BitMEX co-founder and digital asset fund Maelstrom’s Chief Investment Officer Arthur Hayes is taking precautions.
Hayes announced that Maelstrom has allocated 5% of its portfolio to USDe (Ethena USD), a yielding stablecoin, while holding bullish bets on Bitcoin (BTC), Ether (ETH), and other cryptocurrencies.
“Given the uncertainty, Maelstrom has 5% of the fund invested in USDe and is yielding roughly 13%,” Hayes said in a statement. Hayes also confirmed that the fund holds significant long positions in crypto assets despite election-related risks.
Using USDe to Hedge Volatility
USDe is a synthetic dollar developed by Ethena Labs that maintains a peg of $1 through collateralized stablecoins and arbitrage strategies.
Yields come from funding fees earned by shorting BTC and ETH futures, and users who hold staked USDe (sUSDe) automatically receive protocol rewards.
The delta-neutral structure provides protection against market volatility ahead of the November 5 elections and the announcement of results on November 8.
Potential social unrest following the election could cause short-term volatility, Hayes said.
He cited estimates from decentralized markets that showed Donald Trump ahead of Kamala Harris, despite traditional polls showing the race extremely tight.
“If the election goes through without unrest, the markets will rally. When we find out who won and the result is accepted, we will be putting all our sUSD into crypto,” Hayes said.
As of Friday, Bitcoin options on Deribit show an expected volatility rate of 3.8% on election day. Crypto markets have historically experienced large swings even on non-eventful days, making this election even more critical for investors.
Hayes believes that the election outcome will not significantly impact Bitcoin's long-term prospects.
“Both Trump and Harris will print trillions of dollars,” Hayes said, emphasizing that increasing deficits will increase demand for Bitcoin and gold as protection against inflation.
*This is not investment advice.