2018: Year of the Crypto Fund
A protracted bear market in cryptocurrencies has not deterred hedge funds and other institutional players from entering the digital currency space. According to new research, 2018 is shaping up to be a record year for crypto funds, with the number of new ventures growing steadily.
Crypto Funds on the Rise
A total of 96 cryptocurrency funds have launched this year, according to Crypto Fund Research, putting the market on track to outperform last year’s pace of 156. The Rohnert Park, California-based research firm expects there will be a total of 165 crypto hedge funds launched this year.
“We expected a large number of new crypto funds to launch in 2018 to satisfy growing investor demand.” said Josh Gnaizda, founder of Crypto Fund Research. “However, the pace of new fund launches is a bit surprising given the dual headwinds of depressed prices and less than favorable regulatory conditions in many regions.”
If 2017 was “the year of bitcoin,” 2018 is shaping up to be the year of the crypto fund, Gnaizda says. There are now 466 cryptocurrency funds around the world, with more than half coming into existence over the past 18 months.
Pantera Capital, one of the earliest and most well known funds, boasts a lifetime return of 10,000% investing in digital assets.
Crypto funds are also proving popular among Chinese investors, who are barred from investing in digital assets in their home country. As Hacked reported in June, Chinese nationals have made Singapore their destination of choice for launching token investment funds.
The researchers claim that crypto hedge funds are the fastest growing segment of the market, accounting for more than half of the total. A total of 252 funds are located in the United States, followed by 34 in Hong Kong and 29 in the United Kingdom.
Protracted Bear Market
Although the rise of crypto hedge funds is evidence that more investors are taking interest in digital currencies, failure rates are likely to rise if bear-market conditions persist.
“While volatility in the crypto markets can attract some investors to sophisticated crypto funds. It remains unclear if the industry can support such a large number of funds, with limited track record, if we experience an extended bear market,” Gnaizda added.
The cryptocurrency market is once again becoming synonymous with bitcoin as traders cut ties to more speculative altcoins and tokens. At the time of writing, bitcoin’s dominance rate, or the share of the total market capitalization held in BTC, was 51.9%.
After a minor recovery, coin values were down again on Monday. According to CoinMarketCap, the total value of all coins in circulation is $210.5 billion. Last week, the market bottomed near $207 billion, the lowest in a year.
A look at the technical charts reveals little evidence that a bullish reversal is imminent. However, fundamental developments have been positive with banks and stock exchange operators announcing big plans to enter the market.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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