Vision Hill Research Unveils Crypto Benchmark Framework For Investor Strategy

Vision Hill Research recently unveiled a crypto benchmark framework to help analyze investment performance in the crypto industry.

Vision Hill Research describes itself as “a crypto asset and blockchain focused fund of funds.” In a blog post last week on Medium, the research firm proposed how to measure, segment, and analyze the crypto investment space.

Vision Hill’s benchmark was used to calculate cryptoasset fund gains in Q2 2018. As Vision Hill Research reports,

“Crypto hedge fund managers outperformed bitcoin by 560 bps during the second quarter of 2018. Vision Hill Research found the median quarterly return of its in-scope crypto hedge funds (35 data points used for this analysis) to be -4.3% during Q2’18, whereas bitcoin’s quarterly return amounted to -9.9% over the same time period.”

Vision Hill Research goes on to explain their framework. They claim their framework isn’t perfect; instead, it’s “a starting point” and “a call to action to the community” to help improve the framework so it’s one day widely adopted across the crypto investment community.

Based on Vision Hill Research’s analysis, crypto hedge fund managers were able to limit losses in the second quarter of 2018 compared to the dropping price of bitcoin. Bitcoin dropped about 10%, while crypto hedge funds dropped 4.3%, on average.

With that in mind, let’s look at how Vision Hill Research analyzes the crypto space and segments crypto investments.

How To Segment The Cryptoasset Industry

First, Vision Hill Research believes the cryptoasset industry can be separated into three main segments:

  • Public crypto markets
  • Private crypto markets
  • Crypto-enabled markets

The “public crypto markets” segment refers to the market cap of cryptoassets – which currently sits at around $200 billion. It includes bitcoin, Ethereum, and other publicly-traded cryptoassets.

The “private crypto markets” segment, meanwhile, refers to capital formation around private token projects that have not undergone public sales, including projects like Filecoin, Blockstack, DFINITY, and others. This can include simple agreements for future equity (SAFEs) or simple agreements for future tokens (SAFTs) as well as Series A, B, or C fundraising rounds. Vision Hill Research believes that there’s an aggregate value of $10 to $15 billion of equity in private crypto markets.

Meanwhile, the “crypto-enabled markets” category refers to markets that “either bootstrap existing business models and tailor them toward crypto, or create new businesses in crypto.” This can include companies that create a mining strategy or a staking strategy. It can also include crypto news research websites like our own site.

How To Categorize Crypto Investment Strategies

Different crypto funds have different investment strategies. Some funds are aiming for safe, long-term, low-risk growth. Others are swinging for the fences with high-risk, high-reward cryptoassets.

Vision Hill Research decided to segment crypto funds into different investment strategies. They created five different categories with multiple subcategories under each, including Fundamental, Quantitative, Venture, Smart Beta, and Opportunistic crypto fund investment strategies.


Fundamental Long Only: These crypto hedge funds use extensive research and quantitative/qualitative metrics to determine which cryptoassets have the best long-term potential to accrue significant value over time. Vision Hill expects to see these funds expand to a sub-sector focus over time, including funds dedicated to DApps, NFTs, DAOs, TCRs, uncensorable value transfer, and other sectors.

Fundamental Long/Short: These managers complete extensive research in the space as well. In addition to buying and holding assets with significant long-term value, these managers short-sell assets that are expected to decrease in value.

Hybrids: Some funds use a hybrid strategy to invest in a range of projects, taking long and short positions across the cryptoasset space


Directional: Directional hedge fund managers “run highly sophisticated quantitative models that produce either “risk-on” or “risk-off” trading signals that direct these managers to execute their discretionary investment strategies in an aggressive or passive way depending on the perceived market cycle,” according to Vision Hill Research. These funds might focus on a single cryptoasset, a basket of assets, or relative trading value between assets.

Arbitrage / Market Neutral: These managers use strategies that remove or limit market risk while capturing alpha returns. Exchange arbitrage strategies capitalize on price discrepancies between exchanges geographically – like when bitcoin is worth twice as much in Venezuela or Zimbabwe as it is on a Japanese exchange. These funds commonly use systematic algorithmic trading strategies.


Credit: Crypto hedge fund managers using an opportunistic credit strategy leverage the traditional lending model and apply it to the crypto field. They give out loans in crypto or fiat, then generate interest.

Mining: Some funds invest in crypto mining warehouses and infrastructure, generating returns through cryptoasset mining.

Staking: Some funds focus specifically on mining proof of stake cryptocurrencies, which work in a different way than proof of work (PoW) cryptocurrencies, but can generate similar yields.

Active Ecosystem Participation / Delegate Work Entities: Some funds specialize in being Block Producers in EOS, earning token rewards for their contribution to the network. Validators and other participants can stake, validate, curate, resolve disputes, operate nodes, and perform other tasks to secure the network.


Typically, private markets have a bifurcation between private token strategies and private equity strategies. On the private token side of things, we have crypto hedge funds that invest in projects undergoing private pre-sales. On the private equity side, crypto hedge funds are focusing on business models that don’t warrant a token, but they still invest in these businesses nonetheless. Vision Hill identifies three broad strategies within this sector:

Seed / Early Stage: These crypto hedge funds invest in startups during the very early stage of development. They might enter into a simple agreement for future tokens or equity (SAFTs or SAFEs). They might buy tokens during pre-sales or early stage private sales.

Growth: These crypto hedge funds invest in startups that require capital to expand. With the right injection of capital at the right time, these companies can explode with growth and earn a considerable return for investors.

Late Stage: Some investors finance startups when those startups are positioning themselves for public offerings. These startups may have already undergone significant growth, but the fund sees future potential as the company continues to move forward. Crypto hedge funds might invest in later stage private sales in Series D and onward, for example. Or, for companies releasing tokens, late stage crypto hedge funds might join at network launch, the airdrop, or public token listing.

Smart Beta

Active Indexing: Active indexing crypto hedge funds will index to a certain benchmark but are overweighting or underweighting certain selected cryptoassets in an effort to outperform the benchmark. A fund might track the top 10 or top 50 cryptocurrencies in the market, for example, with heavier weighting on cryptocurrencies with high potential and lower weighting on cryptocurrencies that might fall off.

Passive Indexing: Other crypto hedge funds use a passive indexing strategy. The fund buys a certain index of cryptocurrencies, then holds the fund to a certain balance. You might buy a fund that tracks the top 10 cryptocurrencies by market cap, with each cryptocurrency weighted by its current market cap.

The Vision Hill Benchmark Framework

After outlining all of the investment strategies listed above, Vision Hill Research proposes their benchmark framework. How can we track the performance of the crypto funds above? Vision Hill suggests using their benchmark framework.

The problem here is that you can’t compare a long-term, low-risk, slow-growth fund’s performance to the performance of a short-term, high-risk, high-reward fund. You also can’t compare funds exclusively to bitcoin. However you’re comparing funds or cryptoassets, you’re comparing apples to oranges.

“A long/short, alpha-seeking manager, in our view, should not be benchmarking its performance against a basket of “blue chip” cryptoassets that do not incorporate short-selling as a strategy or other active strategies in an attempt to outperform the market.”

That’s why Vision Hill proposes a new benchmark.

Vision Hill bases its benchmark on the idea that every benchmark should have seven properties, according to CFA institute standards. Those seven properties can be remembered with the acronym SAMURAI, including:

  • Specified in advance
  • Appropriate
  • Measurable
  • Unambiguous
  • Reflective of current investment opinions
  • Accountable
  • Investable

Vision Hill Research believes its benchmark meets the standards above, and that’s why they propose it as an effective way to track hedge fund performance in the crypto space.

Some of the key findings from the benchmark, however, are summarized below:

  • Bitcoin Performance Through Q2 2018 (as of June 30, 2018): -9.9% (average), -9.9% (median)
  • Crypto Hedge Fund Performance: -5.2% (average), -4.3% (median)
  • Fundamental Long Only: -4.0% (average), -5.1% (median)
  • Fundamental Long/Short: -9.4% (average), -5.3% (median)
  • Smart Beta (Passive Indexing): -6.5% (average), -4.4% (median)

Vision Hill’s benchmark allows us to track crypto hedge fund performance across different hedge funds with different strategies, then compare that performance with the price of bitcoin over the same time period to get usable information about the space. In the case above, we can track cryptoasset market performance in Q2 2018.


Ultimately, Vision Hill Research proposes their benchmark as a way to track performance across the cryptoasset field, including among different crypto funds with different investment strategies against the price of bitcoin and other cryptoassets.

The firm is currently seeking input on its benchmark proposal, and they admit it isn’t perfect. For now, however, it’s one of the most effective ways to track performance between different cryptoassets and cryptoasset funds.

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