9 Cryptocurrency Hedge Funds Have Ceased Operations in 2018April 11, 2018
At least 9 cryptocurrency hedge funds have ceased operations in 2018. The closures include Alpha Protocol and Crowd Crypto Fund. The latter has already shut down its digital platforms as well as Facebook and Twitter accounts. Alpha Protocol, which is a distributed fund, has decided to refund its investors of their funds. The fund’s website announced that the refunds were completed on the 31st of March.
Cryptocurrencies are among the most popular investment products today. Discussions in chat rooms are about cryptocurrency. Those who want to make it big in the world of cryptocurrency must know the latest trends and news surrounding Bitcoin and other virtual currencies. They have to analyze and choose which cryptocurrencies have the potential to trade faster and higher than the rest. The popularity of cryptocurrencies has also encouraged the advent of various cryptocurrency hedge funds.
However, cryptocurrency hedge funds are getting less interest from investors. In fact, their returns dropped almost 23% this year. A bear market that lowered token prices to some of the lowest levels is not helping this figure either. Kyle Samani, founder of Multicoin Capital, stated that new capital has slowed even for higher-profile funds like theirs. Only 2 of the top 25 cryptocurrencies by market capitalization experienced gains in the 1st quarter of 2018. The overall market cap dropped from $830 billion to $251 billion last week.
Over 200 cryptocurrency hedge funds have popped up over the last few years, but Autonomous Research LLP global director Lex Sokolin predicted that almost 10% of these will cease operations by January 2019.
At about $7,000, Bitcoin is at its lowest value since November. The past and recent plunge in the cryptocurrency’s value has investors thinking twice. Billionaire Mike Novogratz chose not to proceed with his plans of launching a cryptocurrency fund in December. He instead launched a merchant bank that is focused on cryptocurrencies and projects based on related technologies. Polychain Capital, which is most likely the largest cryptocurrency hedge fund in the market with almost $250 million under management, decided in January against proceeding with IPO.
Some funds enjoyed gains of over 1000% last year, which helped spread the excitement that made Bitcoin popular. This year, however, is not so generous towards hedge funds. Protocol Ventures founding partner Rick Marini thinks that only 50% hedge funds will be capable of raising enough outside funds to be viable enough to help institutional investors. The rest will not be so lucky and face difficulties in raising their needed outside capital.
However, new hedge funds are still popping up as idealists gamble on the blockchain’s transformative nature. Blockchain is the distributed ledger technology that supports cryptocurrencies like Bitcoin, Ripple, Litecoin and Ethereum.
According to Marini, he currently gets emailed pitches from 3 new cryptocurrency hedge funds daily on average. He usually meets with 2 and only plans to invest in 1 to 2 new hedge funds in 2018.
The future of hedge funds is unknown. One thing that is true, however, is that things will be different this year.