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Crypto Fund Strategies Edge Out Hedge Fund Models

Crypto Venture Fund Strategies are Beating Hedge Fund Models

A report from Bloomberg shows the changing nature of cryptocurrency investment, with crypto venture fund strategies surpassing their hedge fund counterparts for the first time.

The reason for this shift is suspected to be the changing conditions brought by the ongoing bear market and the collapse of initial coin offerings (ICOs) in the wake of the increased regulation from the US. The prices of tokens fell up to 90% last year, meaning investors wanted out and venture funds replaced them, entering with purchases at cents on the dollar.

Jeff Dorman, partner and portfolio manager at Los Angeles-based Arca, explained to Bloomberg the benefit for the venture capitalists, saying that it was an opportunity to ”buy below even the cash value of the company”.

Last year, 125 new cryptocurrency venture funds launched, compared to 115 investment-oriented cryptocurrency hedge funds — a stark difference to 2017 that saw 136 hedge funds and just 85 venture funds emerge.

This change is perhaps not surprising; Eurekahedge Crypto-Currency Hedge Fund Index reported average losses of around 70% for crypto hedge funds in 2018.

Despite poor performances, several hedge funds told Bloomberg they are seeing an influx of institutional investors. “We are talking to a lot”, one contributor added.

 

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