A study by crypto analytics firm Autonomous Next has found that the number of crypto hedge funds has been rapidly growing since 2016, showing that crypto investment is a booming industry. All together, crypto hedge funds manage USD 7.5 – 10 billion of assets. This represents the start of what could be a massive wave of institutional investment into the crypto space.
Prior to 2014, only 12 crypto hedge funds were formed; to put this in perspective, Bitcoin launched in 2009. By the end of 2014, there were 27 crypto hedge funds. This growth in hedge funds occurred during and after the rally that pushed Bitcoin’s price above USD 1,000 for the first time. In 2015, there were 35 crypto hedge funds, the small amount of growth was probably due to the strong bear market at the time. In 2016, the number of crypto hedge funds jumped 60% to 56.
2017 saw the biggest crypto rally in history, with Bitcoin rising all the way to USD 20,000 and Ethereum rallying to become the second most valuable cryptocurrency. Simultaneously, numerous other cryptocurrencies launched and became very popular. By the end of 2017, there were 251 crypto hedge funds, a 348% increase since 2016.
There is definitely some correlation between a rising crypto market and the rate of formation of new crypto hedge funds, but even during bear markets, additional crypto hedge funds have been forming. During the first half of 2018, which was a strong bear market, the number of crypto hedge funds rose 24% to 312.
Crypto hedge funds are using different strategies, including making money from trading, buying and holding various cryptocurrencies, tracking an index comprised of various cryptocurrencies, hedge funds that track the average of crypto hedge funds, and investing in crypto infrastructure like wallets and exchanges. A tiny fraction of crypto hedge funds is focusing on artificial intelligence and quantum technology.
Apparently, the top hedge funds hold most of the capital, with the top ten crypto hedge funds holding 43% of the total money in crypto hedge funds and the top 50 crypto hedge funds holding 80%.
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