(Bloomberg) -- While hedge funds are deploying tried-and-true strategies such as the basis trade to profit from the recent influx of US Bitcoin and Ethereum ETFs, the quantitative fund Kbit says sticking within the digital asset world will prove to be more lucrative.

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“The larger opportunities, higher return opportunities are in the crypto native markets,” Ed Tolson, founder and chief executive officer of Kbit, said in an interview. “So you have to be exposed to the centralized crypto exchanges, exposed to the trading the tokens, the perpetual swaps, the derivatives themselves.“

Kbit, which manages more than $100 million in assets, uses a market neutral trading strategy that seeks to profit from both increasing and decreasing prices while seeking to minimize overall market risk. The firm, incorporated in the British Virgin Islands, is also a market maker. He declined to disclose the fund’s performance because of client confidentiality.

In tradition markets, hedge funds use the basis trade to profit from the price differences that can arise between an asset and futures tied to those same assets. With the successful launch of Bitcoin and Ether ETFs, the same hedge funds have also started doing that with buying ETFs and shorting Bitcoin futures on the CME, said Tolson.

“That same style of trade is more lucrative if you do it in native crypto instruments — buy spot crypto and short perpetual swaps,” said Tolson, who was the director of trading technology at Citadel Securities before founding Kbit in 2017. Perpetual swaps are futures contracts without an expiration date that are only available to non-US customers.

“We’re a quant shop trading anything that has volume, creates opportunities for us and creates inefficiencies that that we can trade capitals on, said Tolson who estimated that Kbit trades around 500 different tokens. “So we will absolutely trade tokens even if we don’t like the fundamentals.”

Kbit has made seven new hires this year including Thomas Johnson, a former senior quant developer at Citadel, as principal research engineer, and Sean Slotterback, who spent five years at Highbridge Capital Management. Slotterback is leading expansion efforts in forecasting and portfolio risk management.

Eddie Markman, who spent eight years as chief financial officer and chief compliance officer at Sun Mountain Capital, also recently joined as chief financial officer. The team has doubled in the past year to 14 people.

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