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Philipp A. Baumann is the founder at the Swiss based Quant Hedge Fund Z22 Technologies, specialized in systematic investment strategies for Traditional Finance and Crypto.
Money has always been a story of evolution — from shells to gold to Bitcoin — with intermittent periods of debasement and inflation. Every stage has reflected humanity’s desire for a form of money that is scarce, durable, portable, and divisible. Bitcoin is the first monetary asset that meets all these criteria and, furthermore, is digital, incorruptible, and neither issued nor controlled by a government or central bank. Bitcoin combines gold’s best properties with the internet’s global reach and empowers users with direct control over their finances, removing the reliance on intermediaries. But beyond being the hardest money, Bitcoin offers far more than just a store of value. Bitcoin is no longer just a speculative asset but an emerging form of superior collateral in modern finance that is quietly reshaping how global wealth is managed. Bitcoin is emerging as the superior form of collateral in modern finance, allowing investors to capture market returns without selling any of their Bitcoins.
In traditional finance, the wealthiest investors never liquidate their high-conviction assets. Instead, they borrow against them or use them as collateral. The rationale is very simple: selling an asset that is expected to appreciate eliminates future gains and creates opportunity costs. With inflation and currency debasement, nearly any asset is drastically appreciating in value against fiat currencies. Wealthy individuals do their absolute best to hold as few actual dollars as possible.
From an investor’s perspective, Bitcoin is the hardest form of money ever created. It makes sense to treat it as the base currency. The challenge is that Bitcoin itself does not generate yield. Historically, the only ways to earn yield were either to sell Bitcoin for dollars, invest in something, and then try to buy back more Bitcoin later, or to post Bitcoin as collateral, borrow dollars, and invest those.
The first approach creates opportunity cost, since by definition you must invest in an asset that outperforms Bitcoin — something not easily achieved. The second adds another cost layer (interest on the loan) and complexity, where, in addition to the risk of your investment, you also face risks from the lending platform (counterparty, custody, and liquidation risk). Furthermore, the Bitcoins you post as collateral are locked in and, again, do not generate yield. Loan-to-value ratios are usually 50% or lower, meaning that for 1 BTC worth USD 100,000, you receive only USD 50,000. In such a case, you risk losing your BTC if the price falls more than 50%, or you may face a margin call. A 50% drawdown is not unusual for Bitcoin.
A far more efficient approach is to keep Bitcoin as your investment asset (unit of account) and allocate it directly into a yield-generating strategy or fund. In recent months, I have noticed a strong rise in Bitcoin-denominated funds, which measure returns in Bitcoin instead of fiat. The goal of such funds or strategies is simple: to accumulate more Bitcoin for its investors.
At the strategy level, a portion of the Bitcoins provided by investors can be used as collateral for trading strategies designed to generate yield. In this way, Bitcoin remains the base asset for the investor, while the fund actively deploys capital to grow the investor’s Bitcoin holdings. This allows investors to remain long BTC while benefiting from potential price appreciation in fiat terms and also get an additional yield in Bitcoin. This is not just a new product; it is the beginning of a parallel financial system, where Bitcoin is not merely an investment for speculation on fiat price appreciation but the base currency for accumulating wealth.
As with every investment, there is no guarantee of returns. Beyond market risk (a strategy might not work), crypto-related strategies bring additional layers of operational risk. These include counterparty risk (at both the fund and exchange level), custody risk, and the risk of technical failures such as outages as well as vulnerabilities in smart contracts or protocols. Together, these factors make operational resilience just as important as the investment strategy itself. Investors should not only consider potential returns and the investment strategy itself but also conduct careful due diligence on the managers they entrust their Bitcoins with. Such due diligence includes, for example, reviewing the operational processes, risk management, and regulatory status of the manager.
The implications are clear: Bitcoin is becoming the foundation of a parallel financial system. As more funds denominate in Bitcoin, collateralization ensures that BTC is no longer idle but actively powering financial activity. This self-reinforcing cycle strengthens Bitcoin’s monetary premium and deepens its integration into traditional financial markets. The future of finance is not about selling or timing Bitcoin but empowering it — unlocking growth while staying long on the hardest asset ever created in human history.
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