The number of crypto hedge funds has increased dramatically in 2017. Currently, there are over 100 crypto hedge funds and what’s more impressive is that more than 80% of them have been launched in just the past year. Morgan Stanley, one of the world’s largest financial services firm, has determined that hedge funds invested approximately $2 billion in the cryptocurrency industry.
Michael Novogratz, former hedge-fund manager and partner at Goldman Sachs, is planning to launch a $500 million crypto hedge fund. What’s surprising is that Novogratz thinks crypto is the “biggest bubble of our lifetimes”. His statements and actions are clearly contradictory in nature because he has also predicted that bitcoin’s price will surge to $40,000 by the end of 2018.
According to data tracking company HFR, crypto hedge funds have yielded gains of over 1600%. HFR currently offers two investable indices: HFR Blockchain Composite Index and HFR Cryptocurrency Composite Index. The HFR Blockchain Composite Index focuses on investments in the blockchain architecture while the HFR Cryptocurrency Index deals with funds that trade in cryptocurrencies.
Crypto hedge fund BlockTower Capital‘s CIO, Ari Paul, classifies cryptocurrencies as hyper-volatile, emphasizing the fact that bitcoin’s value has dropped by 80% on 5 different occasions. He also mentions that, at present, challenges remain around how to securely hold cryptocurrency and how to regulate it. Despite these risks, at least 84 new crypto hedge funds have been launched this year. This number is huge considering that there are only a little over 100 crypto hedge funds in total and that they began to start up in 2011.
One of the most impressive gains of this year is by a crypto hedge fund belonging to Pantera Capital, which has yielded a whopping 24,004% return. Hedge fund company, Typhon Capital Management, will be introducing a new crypto hedge fund next year. The initial goal of this fund will be to invest in ICOs and various cryptocurrencies. The company’s CEO says that they are more confident now in investing their client’s money into the cryptosphere.
Crypto hedge fund manager, Johnny Steindorff, made investments in bitcoin, Ethereum, and Qtum through his company Focus Investments, which he started in 2014. One of Steindorff’s funds even performed better than bitcoin if you do the calculation from 2014 up till today. Steindorff along with a few other veteran cryptocurrency investors have now launched Distributed Global, a promising new set of crypto funds.
Although the crypto-market remains volatile, it continues to attract enthusiasts and investors from all over the world. Crypto hedge funds might still represent a relatively small percentage of the cryptosphere. However, their rise, especially in 2017, indicates that we might continue to see increased activity in this sector.