Are Those Cryptocurrency Hedge Funds Still On The Rise ?
The crypto hedge funds pose to be the future of cryptocurrency. What are they and why are they so? Know more about it.
The Rise of the Crypto Hedge Fund
It has been found as a popular choice that hedge funds are for risk-averse investors as they rely on the fund’s visionary founder and teams of analysts to guide their money in the right direction. It has to be noted that whether led by Ray Dalio, George Soros, or another famous mogul as the best funds constantly seek out the next edge even if they already outperform the market each year. Hence it is the rise of cryptocurrencies like bitcoin they may have finally found. Whereas the timing however is vital.
There has been a massive percentage growth of Bitcoin even in the face of extreme stress testing that has legitimized it in the eyes of investors everywhere with accessible infrastructure making transacting via the blockchain easy and people can exchange crypto with fiat currency opening the waters to the big fish.
It was seen hat this has created the perfect entry for hedge finds where giant influential funds see a comparatively small volume asset like bitcoin plus demand in the investing populace and have finally taken the plunge. Therefore there are new funds are emerging as well as the development has been met with both dismay and accolades in the crypto community whereas one thing is for certain that returns so far have been astounding
What Is A Crypto Hedge Fund?
The truth is that unlike a cryptocurrency index fund, and ETF or exchange, a hedge fund is a different way for a person to invest in a large group of underlying securities as these are managed by teams of expert investors rebalanced on occasion and endlessly analyzed. Thereafter investors receive profits from these experts market maneuvers as at present there are two kinds of cryptocurrency hedge funds. They are those that manage portfolios containing exclusively cryptocurrency as well as those that have added some cryptocurrency to a mix of other asset types.
Therefore, the former type of hedge funds seeks to maximize returns by adding newly offered coins tot the mix to replicate the 82,000 % returns that the Ethereum ICO achieved as the latter are arguably more risk-averse but are less profitable given cryptocurrency’s stellar rise.
The Crypto Hedge Funds
The truth is that although the broader financial world has been slow to recognize cryptocurrencies as a viable area of investment that hasn’t stopped some hedge fund managers from making moves in that direction whereas in fact as cryptocurrency interest among everyday investors has surged the number of cryptocurrencies focused hedge funds launched has also climbed.
Furthermore, it was noted that according to a report by Benzinga there are a number of hedge funds with a cryptocurrency or blockchain focus that stands at roughly 150, and Agecroft Partners CEO Don Steinbrugge is expecting that the number doubles or even perhaps triples over the course.
As A Venture Capital Approach
Even though many of the new cryptocurrency hedge funds have adopted an approach familiar to venture capital firms. Consequently, it is found that in these cases the hedge funds look to fund the new entries into the cryptocurrency space thereby lending their support and financial backing to new coin offerings or start-ups helping to enhance the industry or make use of the new technology.
Thereby that’s not to say however that the hedge funds focused on cryptocurrency are playing an outsized role when it comes to an amount of money they are working with. Herby the entire hedge fund industry worldwide stands at roughly $ 3 trillion in assets under management.
Whereas in comparison only about $ 3 trillion or one-tenth of 1% of the total is allocated toward the cryptocurrency and blockchain spaces. hereafter Steinbrugge now anticipates their number to increase by five times over the next year, and even the percentage of hedge fund money allocated to cryptocurrency investments that will likely be minuscule in comparison to the rest of the hedge fund world.
Finally Investment or Gambling?
There is one reason why hedge funds may be cautious about entering the cryptocurrency space which is that it has been largely speculative up until this point and as Steinbrugge warned, people should be very careful investing in cryptocurrency. Also, they should view it as gambling as they are very bullish on the crypto long term but a lot of the valuations have been driven by greed and unsophisticated investors who have jumped in after seeing how much these securities have gone up recently and are projecting it is going to continue.
Therefore even if there is a crash of the cryptocurrency bubble the hedge funds could still make money off of the space, as with a market that is constantly evolving, and also with plenty of money made from blockchain and cryptocurrencies being invested back into space there are new coins and services all the time. Hence Steinbrugge said that those who can identify the future leaders can make a lot of money. As also those who are investing in cryptocurrency just because it went up are gambling