- 20 percent of all hedge funds launched so far this year are cryptocurrency focused.
- Figure is a great improvement from the 3 percent in 2016 and about 16 percent of 2017.
- Figures defy the traditional thinking that hedge funds launch when the market is up.
It’s no longer Initial Coin Offerings (ICOs) that are the hot topic in cryptoshpere; the new winner is cryptocurrency hedge funds. The latest research shows that up to 20 percent of all hedge funds launched so far this year are cryptocurrency focused, investing largely in Bitcoin and Ethereum.
Massive Improvement Compared to Previous Years
A press release showing data from Crypto Fund Research (CFR), a global market intelligence provider, shows that close to 90 cryptocurrency hedge funds were launched in the first 9 months of 2018, with the total number expected to hit 120.
According to the release, it is estimated that there will be close to 600 hedge funds launched and the 120 that are cryptocurrency related account for 20 percent. This crypto-focused hedge funds usually invest around well-established digital currencies like Bitcoin, Ethereum and Ripple.
The press release further noted that the current figure is a great improvement from the 3 percent that was established in 2016 and about 16 percent of 2017. The rise has been occasioned by the rising number of crypto funds, with as much as two-thirds of all those that are still running coming up in the last seven quarters.
Defying a Traditional Held Belief
According to the study, the figures have defied the traditional thinking that hedge funds are apt to launch when the market is up. However, it may appear like cryptocurrency hedge funds have flourished even as the leading digital currencies Bitcoin and Ethereum have lost close to half the value they held in December 2017. Commenting on this trend, the founder of Crypto Fund Research Joshua Gnaizda stated:
“Traditional thinking that hedge funds tend to launch most frequently in bull markets […] while we don’t believe the rate of new launches is sustainable longer-term, there are currently few signs of a significant slowdown.”
Despite the rapid growth of cryptocurrency hedge funds, they only manage assets worth about $4 billion, compared to the entire global hedge fund sector that manages over $3 trillion. There are over 303 crypto hedge funds making up 3 percent of the over 9000 that are currently in existence.
The countries where crypto-focused hedge funds have seen a surge include the United States, Switzerland, Malta, and the Netherlands while Australia, China, and the United Kingdom have seen multiple funds launch within their jurisdictions. However, it is interesting to note that some crypto hedge funds are not having it easy. Pantera Capital, a leading hedge fund is rumored to be down 72 percent while TechCrunch is leaving the US in response subpoenas from SEC.
