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The Crypto Hedge Fund’s Ascension

Hedge funds have long been a popular choice for risk-averse investors who entrust their money to the fund’s visionary founder and teams of analysts to invest wisely. Even if they already exceed the market year after year, the finest funds, whether managed by Ray Dalio, George Soros, or another well-known investor, are always looking for the next advantage. They may have finally found it with the rise of cryptocurrencies like Bitcoin. However, timing is crucial.

Even in the face of intense stress testing, Bitcoin’s tremendous percentage increase has legitimized it in the eyes of investors all around the world. Transacting on the blockchain is simple thanks to accessible technology, and people can trade crypto for fiat currency, allowing the big fish to enter.

For hedge funds, this has produced the ideal entry point. Giant, important funds have finally taken the jump after seeing a relatively low-volume asset like Bitcoin (which recently exceeded $100 billion in market capitalization) and demand from the investing public. There are also new funds on the horizon. The crypto community has reacted with both dismay and praise to this development, but one thing is certain: the returns have been phenomenal thus far.

What is a Crypto Hedge Fund, and how does it work?

A hedge fund is a different way for a person to participate in a broad collection of underlying securities than a bitcoin index fund, an ETF, or an exchange. These are overseen by teams of skilled investors, rebalanced on a regular basis, and constantly scrutinized. The market maneuverings of these professionals enrich investors. There are two types of bitcoin hedge funds available right now. Those who manage bitcoin-only portfolios and those that have included cryptocurrency into a mix of other asset classes.

The first sort of hedge fund aims to optimize profits by incorporating freshly issued coins (ICOs) into the mix, in order to mimic the 82,000 percent returns produced by the Ethereum ICO, for example. Given cryptocurrency’s meteoric rise, the latter are arguably more risk-averse, but also less profitable.

(See Why Aren’t Hedge Funds Interested in Bitcoin for more information.)

Who Stands to Gain?

Those interested in profiting from the rise of Bitcoin, for example, can open an account with the eToro Cryptofund. Individuals can invest in a carefully selected mix of cryptocurrencies on this hedge fund platform, such as the Crypto CopyFund. This fund allows investors to follow the market movements of Bitcoin and other well-known cryptocurrencies including Ethereum, Ripple, and Dash.

Those who are just now adopting cryptocurrency-centric investing techniques are still ahead of the curve, even though early bitcoin purchases are already billionaires. Many people believe that building a portfolio of stable cryptocurrencies based on high-volume blockchains is a good idea and a good way to ensure a secure financial future. So far, they’ve been correct, and the last ten years have demonstrated that weak hands sell at their own cost.

While no one can foresee the value of cryptocurrencies in the future, the notion has gained traction in recent years. They have also demonstrated that consumers are willing to invest, which is a good sign for future price growth. Investors who believe in the technology and are willing to put their money where their mouth is, but do not want to be fully exposed to the new (and frequently volatile) market, will find a secure crypto hedge fund to be an excellent compromise.

The Point of View of Traditional Hedge Funds
Even though Bitcoin is still a minor part of the hedge fund industry, even the most established funds can sense what’s coming. Efforts to move emerging markets into the twenty-first century have been gradual, but the rise of cryptocurrencies has made staying put much more difficult. Many millennials are choosing to “unbank” and put their money in a cryptocurrency exchange rather than a bank account. Institutions have been pushed to embrace bitcoin as part of their business model as a result of this trend.

While storing money solely in exchanges is risky, considering the Mt. Gox debacle, it positions hedge funds as the ideal middle ground between the lawless crypto-world and the suit-and-tie banking experience. According to Hedge Fund Alert, there are over 15 digital currency funds operating today, with another 25 on the way in the next years, all ready to support the new generation of “crypto billionaires.”

What do you think?

Written by Trevanna Gordon

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