Cryptocurrency hedge funds’ property beneath administration have been rising considerably, rising to greater than $2 billion on the finish of final yr, based on a current survey.
The crypto hedge fund business is anticipated to “grow significantly” together with the price of bitcoin. $2 Billion Cryptocurrency Hedge Fund Business Set to ‘Develop Considerably’.
Hedge Funds’ AUMs Doubled in 2019
Cryptocurrency hedge funds’ property beneath administration greater than doubled in 2019, based on a brand new survey by PWC and Elwood Asset Administration Providers Ltd. Entitled “2020 Crypto Hedge Fund Report,” the doc was revealed on Might 11, the day of the third Bitcoin halving. The information comes from “the largest global crypto hedge funds by assets under management (AUM),” the report particulars, including that it consists of crypto index funds and crypto enterprise capital funds.
“Our Q1 2020 research shows that there are around 150 active crypto hedge funds. Almost two thirds of these (63%) were launched in 2018 or 2019,” the report’s authors wrote, elaborating:
We estimate that the entire AUM of crypto hedge funds globally elevated in 2019 to over US$2 billion from US$1 billion the earlier yr … The typical AUM elevated from US$21.9 million to US$44 million.
Most cryptocurrency hedge funds surveyed (97%) traded BTC, adopted by ETH at 67%, XRP at 38%, LTC at 38%, BCH at 31%, and EOS at 25%. The substantial improve in AUM is also attributed to the rise within the costs of cryptocurrencies. Bitcoin’s price, for instance, rose from $3,872 on Jan. 1 final yr to $7,174 on Dec. 31.
The median AUM at fund launch is $2 million in 2019, “indicating that funds have generally seen a 4X increase in AUM,” the report emphasizes. Throughout the yr, the share of crypto hedge funds utilizing an impartial custodian elevated from 52% to 81% and 86% used an impartial fund administrator. About 90% of hedge fund traders have been both household workplaces (48%) or high-net-worth people (42%). A small share of respondents have been foundations, endowments, venture-capital funds or funds-of-funds however none cited pension funds.
Moreover, cryptocurrency hedge funds are typically domiciled in the identical jurisdictions as conventional hedge funds, most of that are within the Cayman Islands (42%), adopted by the U.S. (38%) and the British Virgin Islands (8%). The report additionally factors out that the survey outcomes have been primarily based on solutions by fund managers and weren’t verified by an impartial social gathering.
‘Significant’ Progress Anticipated
The report moreover finds that “the launch of actively managed crypto funds is highly correlated with the price of bitcoin (BTC)” and “The Bitcoin price spike in 2018 appears to have been a catalyst for further crypto funds to launch.”
After the third Bitcoin halving, many individuals count on the price of bitcoin to rise by the top of the yr. Amongst them is Galaxy Digital CEO Mike Novogratz who believes that the price of bitcoin would hit $20,000 by December. Virgin Galactic Chairman Chamath Palihapitiya has been saying that bitcoin’s price may go to $1 million or extra whereas Pantera Capital CEO Dan Morehead mentioned it may peak at $115,000 by August subsequent yr.
One other bullish transfer for the crypto business comes from the hedge fund supervisor Paul Tudor Jones who revealed on Monday that he has virtually 2% of his property in bitcoin. He defined that he’s shopping for bitcoin as a hedge towards the inflation and central banks’ cash printing, as bitcoin reminds him of the function gold performed within the 1970s.
PWC companion and world crypto chief Henri Arslanian was quoted by Bloomberg on Friday as saying: “The volatility of crypto markets offers many opportunities for quant traders … The performance of crypto quant funds tends to be more linked with market volatility rather than market performance.” He elaborated:
I count on the crypto hedge fund business to develop considerably over the approaching years as investing in a crypto fund may be the simplest and most acquainted entry level for a lot of institutional traders taking a look at coming into this house.
A number of analysts have predicted that curiosity in cryptocurrencies from institutional traders will improve put up the covid-19 pandemic. Final month, a Japanese analyst outlined three key the reason why institutional demand for cryptocurrencies would rise after the coronavirus disaster. Grayscale Investments lately launched its Q1 2020 earnings report displaying report capital inflows, 88% of which have been from institutional traders. Moreover, a pro-crypto commissioner with the U.S. Securities and Change Fee, Hester Peirce, mentioned she sees institutional demand rising.
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Picture Credit: Shutterstock, Pixabay, Wiki Commons, PWC, Elwood Asset Administration
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