Should You Actually Trust Hedge Fund Managers So Much?
There is a social tendency to put self-appointed experts on a pedestal. With a fancy job title and a great resumé, you can become an expert yourself and be quoted on opinion pieces all over the internet. You can basically see this phenomenon in the crypto world in the figure of the hedge fund manager. Are they so trustworthy, though? Or are they just as flawed as the rest of us mortals?
There is a saying that anyone can make money in a bull market and there is some truth in that. However, how long do these bull markets last? Not so much in the case of cryptos. 2017 saw a great bull rush from the crypto market and it was great up until the end of the year. With triple digit percentage profits, the market was booming.
Some investors made money by simply holding BTC. That is the dream, right? Because of this, many of them were revered as the oracles of cryptos, people who would never be wrong. Then, 2018 came and we all know the history. The bubble crashed.
Polychain Capital, a company led by Olaf Carlson-Wee, was able to make 2303% profit last year. This year, though, the company has lost 40%. The holder of the fund cashed out in fiat cash most of the money a long time ago and now the investors are losing their money.
Some people wonder: how much is luck and how much is it actually skill?
Crypto Fund Managers Are Not Doing So Well
With BTC down 55%, it is natural that there would be some losses. Even the best managers would still lose some money with the bear market, as profits are rare in years like this one. This illustrates something, though. It shows that crypto funds are generally not a whole lot smarter than “dumb” normal retail investors.
Pantera Capital was making predictions that the price of BTC would be at $21,000 USD at the end of the year and nothing has actually happened. The prices are still low.
You can use the Eurekahedge Crypto-Currency Hedge Fund Index to measure how well the funds are doing and then you can see that they are down 51.58% on average. This is hardly better than just buy and hold BTC. With the collapse of Ethereum, it is very likely that September will bring even heavier losses.
Hedge Funds Are Down 25%
In the last three months, the hedge funds are down 25%, a significant number when their profit on 2017 was 1,708%. While it looks impressive, BTC gained 1,318% last year and other 13 cryptos outperformed it. Ripple gained over 36,000% and Ethereum was able to gain 9,162%. It was ridiculously easy to make 1,700%.
However, the lust is fading now. The SEC has decided to take action against the first US crypto fund and it looks like the craze is starting to be finished. While these funds are good options for high net work individuals, are they so good?
Actually, no. While some funds are good, most of the ones created last year is simply regular. They will win when the market wins and lose together with the market. Hedge managers are not so smart after all.