Cryptocurrency Hedge Funds Keep Expanding Amidst Bear Market (Study)
Despite the current bear market in the cryptocurrency market, the number of virtual currency hedge and venture capital funds has increased substantially during this year. There are now 466 crypto-related hedge funds operating in the market and 96 of them – 20% of the total – opened at the end of July.
Crypto Hedge Funds Expand
Since December 2017, Bitcoin moved from $20,000 to $5,900 dollars some weeks ago. But it seems that the bear market has been a perfect moment for hedge funds to start operating buying the dip.
It is important to mention that there is also an important regulatory uncertainty about some currencies such as XRP and some exchanges. Additionally, a Bitcoin exchange traded fund (ETF) has not yet been approved.
According to a study that has been conducted by Crypto Fund Research, a provider of market information about cryptocurrency investment funds, informed that the current year will surpass the last one in the number of crypto-funds launched.
By the end of the year, the number could reach 165 compared to the 156 launched during 2017.
There are different cities hosting cryptocurrency funds. We can mention San Francisco with 9, New York with 6, Singapore with 5, and London with four. Other cities are Hong Kong, Dallas, Austin, Philadelphia, San Diego, Tokyo and Zug.
More than half of the cryptocurrency funds that exist nowadays have been established in the last 18 months. About that, the company’s founder, Josh Gnaizda commented:
“We expected a large number of new crypto funds to launch in 2018 to satisfy growing investor demand. However, the pace of ne fund launches is a bit surprising given the dual headwinds of depressed prices and less than favorable regulatory conditions in many regions.”
As the authors of the study mention, this year may be known as ‘the year of the Crypto Fund.’ At the moment, these crypto hedge funds are still waiting new investment tools such as an ETF, but they are also taking advantage of the increased demand for crypto investments.
Of course, Mr. Gnaizda explains that we should be careful about this situation and that he is not sure about he capacity of the cryptocurrency space to accommodate so many funds. He says that volatility is able to attract some investors but it is not clear whether the market can support such a large number of crypto funds.
But an interesting point is that they do not control an important number of funds. In the future, if the number of hedge funds grows at lower rates, the potential remains high for each of those funds. They are currently handling over $7.1 billion dollars, just 3% of the total market capitalization of virtual currencies at the time of writing.
Furthermore, institutional investors are also waiting new investment tools to enter the crypto market. Crypto fund managers and other professionals are waiting for regulatory clarity and new ways to invest in virtual currencies.