Hedge funds are one of the most popular choices for risk-averse investors and rely on the fund’s visionary founder and teams of analysts to guide their money in the right direction. Bitcoin remains a small percentage of the hedge fund industry, but even the oldest and most established funds can see what’s coming.
PWC estimates that there are 150 active crypto hedge funds collectively managing US$1bn AuM (excluding crypto index funds and crypto venture capital funds). More than 60% of these funds have less than US$10m in AuM with fewer than 10% managing over US$50m. 36% of funds surveyed use or can use leverage and 74% can take short positions. Of the funds surveyed, 44% pursue discretionary strategies, 37% quant and 19% fundamental. Crypto hedge funds tend to be domiciled in the same jurisdictions as traditional hedge funds.
At present, there are two kinds of cryptocurrency hedge funds. Those that manage portfolios containing exclusively cryptocurrency, and those that have added some cryptocurrency to a mix of other asset types.
The Largest Crypto Hedge Funds:
Let us take a look at the biggest crypto hedge funds in the ecosystem.
Digital Currency Group was launched in 2015 by Barry Silbert. He began investing in bitcoin companies in 2013. First, as an angel investor; providing funding for many of the earliest companies including Coinbase, BitPay, and Ripple. Established in 2013, Grayscale is a digital currency investing firm. Grayscale also manages the Grayscale Bitcoin Investment Trust (GBTC), which was the first publicly quoted securities solely invested in, and deriving value from, the price of bitcoin when it launched.
Polychain Capital manages the world's premier blockchain asset hedge fund. They are committed to exceptional returns for investors through actively managed portfolios of these blockchain assets. It is one of the biggest in the sector, gaining almost 150 per cent between launch in November 2017 and the end of that year. They believe society will restructure around blockchain-based incentive systems, and accelerate this future by allocating funds toward breakthrough technologies and technical teams building these ecosystems.
Galaxy Digital as a full service, digital assets merchant bank, with distinct trading, asset management, and principal investment. The company saw its assets under management (AUM) shrink from an erstwhile $1 billion high to $591.5 million in Q4 2018. Galaxy Digital Ventures manages a diverse portfolio of early-stage investments primarily centered around blockchain infrastructure, custody, exchanges, ecosystems, and business to business (B2B) software solutions.
They are a private American venture capital firm, founded in 2009 by Marc Andreessen and Ben Horowitz. The firm has made 27 publicly-disclosed crypto investments through its main fund and its dedicated crypto fund. They launched a $300 million venture fund dedicated to investing in “crypto companies and protocols” in June 2018. They are optimistic in Bitcoin software because we are deep believers in the power of software. Software is simply the encoding of human thought, and as such has an almost unbounded design space.