For Cyril Sabbagh, the crypto ecosystem is entering a new phase of maturity. The focus is no longer simply on directional exposure, but on the ability to structure return strategies around an asset class that is now fully integrated into the financial markets. Arbitrage, market inefficiencies, tokenisation and financing strategies will, in his view, shape the sector’s next cycle of development.
How do you assess the current state of the crypto market following Bitcoin’s sharp correction and the sector’s significant decline over recent months?
Corrections are an integral part of financial market history, and digital assets are no exception to this rule. What is interesting today is that, despite the downturns, the fundamentals of the ecosystem continue to strengthen.
Institutional adoption is growing, infrastructure is becoming more professional, derivatives markets are gaining depth and sophistication, and major financial players are now developing dedicated offerings. We are no longer in a phase of fads or experimentation. Digital assets are becoming a permanent fixture in the global financial landscape.
When BlackRock, Fidelity, private banks, regulated derivatives markets and a growing number of listed companies are taking an interest in this asset class, we are no longer in an experimental phase but in a phase of gradual integration into the financial system.
To what extent has the shift in investor focus towards AI and major tech IPOs weighed on the crypto sector?
Markets often operate in cycles of attention. Following a period in which digital assets attracted much of investors’ interest, some of the capital flows have naturally shifted towards artificial intelligence and certain large-cap tech stocks.
But I see this more as a rotation than a replacement. Both sectors are driven by similar dynamics: innovation, network effects, technological infrastructure and the potential for economic transformation.
Indeed, many institutional investors are beginning to view AI and digital assets as two major, complementary structural themes for the coming decade, rather than as competing themes.
Where do you think crypto stands today in its adoption cycle?
In my view, we are in a particularly interesting transitional phase.
The speculative element still exists, as with any emerging asset class, but it is no longer the market’s sole driving force. The arrival of ETFs, the development of derivatives markets, the emergence of institutional infrastructure, the rise of specialist banks and regulatory progress all point to genuine consolidation.
As is often the case in financial history, the maturity of an asset class is measured by the development of its ecosystem. Today, we are seeing the emergence of solutions for custody, financing, hedging, arbitrage and risk management comparable to those that have long existed in traditional markets.
How is the investment rationale for crypto-assets evolving between directional exposure and the pursuit of returns?
For a long time, investing in digital assets essentially meant buying Bitcoin and waiting.
We are now entering a new phase. As in traditional financial markets, investors are now seeking to distinguish between exposure on the one hand and performance generation on the other.
We are seeing growing demand for strategies capable of generating returns regardless of the market’s direction: arbitrage, market-neutral, relative strategies or capital optimisation.
The key question is no longer whether to invest in digital assets, but rather what strategies can be built around them. This is a sign of maturity. An asset class truly comes of age when investors begin to take as much interest in the strategies as in the assets themselves.
What are the main sources of return in the digital asset universe today?
As the asset class matures, we are seeing the emergence of several families of strategies capable of generating returns. The first relates to the native yields of blockchain protocols, notably through staking or restaking. The return then stems directly from participation in the operation and security of the networks.
The second category comprises funding strategies, whether implemented in decentralised finance or in centralised environments. Here, returns stem from making capital available to other market participants.
The third involves bringing mechanisms already well known in traditional finance into the digital realm, notably via tokenised money market funds or certain cash management strategies. Returns in this case stem mainly from the underlying interest rates. This is notably the approach adopted by several players who are currently tokenising money market or bond funds.
The fourth category, which we find particularly interesting, is based on market inefficiencies. Digital assets remain a young, global and fragmented market. This fragmentation gives rise to price discrepancies, valuation anomalies and imbalances in derivatives markets, which can be exploited through arbitrage, basis trading, funding management or market-neutral strategies.
Indeed, it is these strategies that are currently attracting growing interest from professional investors, family offices and wealth managers. Many are now seeking to complement any directional exposure with approaches capable of generating returns that are less correlated with market movements.
How do you incorporate the concept of risk-adjusted returns into a crypto universe that is structurally more volatile than traditional asset classes?
Volatility is often confused with risk. However, for a professional investor, risk corresponds first and foremost to the probability of permanent capital loss.
Our approach involves seeking out sources of return that are only marginally dependent on the direction of the market. A properly constructed arbitrage strategy can exhibit significantly lower volatility than Bitcoin whilst still benefiting from the growth of the ecosystem.
The aim is not to maximise gross performance but to construct efficient, robust and reproducible return profiles over time.
How does Melanion Digital exploit market inefficiencies between centralised platforms and the DeFi universe?
The digital asset ecosystem remains extremely fragmented. The same assets may have different funding costs, different levels of liquidity or even different valuations depending on the platform.
This fragmentation creates inefficiencies which tend to disappear over time but which, for the time being, remain numerous enough to constitute a particularly rich investment opportunity.
Our long-standing expertise in derivatives, trading, structuring and quantitative strategies enables us to analyse these anomalies and identify opportunities offering the best risk-return profile.
How does structuring arbitrage strategies within regulated vehicles change access to these opportunities?
This is probably one of the most significant developments of recent years. For a long time, many professional investors were interested in these strategies but were unable to access them for regulatory, operational or governance reasons.
Regulated vehicles now make it possible to combine the innovation of digital assets with the standards of control, reporting, valuation and risk management to which institutional investors are accustomed.
In my view, this institutionalisation represents a crucial step in the sector’s maturation.
What market opportunity were you aiming to capitalise on when you founded Melanion Digital five years ago?
We were convinced that digital assets, and Bitcoin in particular, would gradually establish themselves as a new asset class within the global financial system. We also believed that the most interesting opportunities would not be limited to simple directional exposure. Very early on, we took the view that digital assets should be actively managed, just like any other asset class.
In fact, we were among the first European players to adopt Bitcoin as a strategic cash asset. But unlike many companies that are now content to simply accumulate Bitcoin passively on their balance sheets, we have, from the outset, sought to put this capital to work.
We have always believed that true value creation lies not merely in holding digital assets, but in the ability to build strategies around them.
This is also what sets Melanion Digital apart. Our teams have backgrounds in derivatives trading, market making, structuring and risk management within traditional finance. Long before the emergence of digital assets, we were already developing sophisticated strategies in traditional financial markets.
We have always viewed digital assets not as a break with traditional finance, but as a new asset class to which we can apply several decades of financial expertise.
The first chapter of digital assets was about adoption. The next will be about management.