The $ 2 billion crypto hedge fund industry will “ grow dramatically ''

The assets of cryptocurrency managed hedge funds have increased significantly, reaching more than $ 2 billion at the end of last year, according to a recent survey. The crypto hedge fund sector is expected to "grow significantly" with the price of bitcoin.

Hedge fund assets doubled in 2019

The assets of cryptocurrency hedge funds managed doubled in 2019, according to a new survey by PWC and Elwood Asset Management Services Ltd., entitled "2020 Cryptocurrency Hedge Fund Report", the document was released on November 11. May, the day of the third half of Bitcoin Data comes from "the world's largest cryptocurrency hedge funds by assets under management (AUM)", details the report, adding that it includes cryptographic index funds and equity funds. cryptographic risk.

"Our research for the first quarter of 2020 shows that there are around 150 crypto active hedge funds. Almost two-thirds of these (63%) were launched in 2018 or 2019, "wrote the report’s authors, explaining:

We estimate that the total assets under management of crypto hedge funds increased globally in 2019 to more than $ 2 billion, compared to $ 1 billion the year before … Average AUM increased from $ 21.9 million to $ 44 million.

Most cryptocurrency hedge funds surveyed (97%) are listed BTC, followed by ETH 67%, XRP at 38% LTC at 38% BCH at 31%, and EOS at 25% The substantial increase in AUM could also be attributed to the rising prices of cryptocurrencies. Bitcoin priceFor example, it went from $ 3,872 on January 1 of last year to $ 7,174 on December 31.

The median AUM at launch of the fund is $ 2 million in 2019, "indicating that the funds have generally seen a 4X increase in assets," the report said. During the year, the percentage of crypto hedge funds using an independent depositary increased from 52% to 81% and 86% used an independent fund manager. About 90% of hedge fund investors were family offices (48%) or high net worth individuals (42%). A small percentage of respondents were foundations, grants, venture capital funds or funds of funds, but none cited pension funds.

In addition, cryptocurrency hedge funds tend to be domiciled in the same jurisdictions as traditional hedge funds, most of which are in the Cayman Islands (42%), followed by the United States. USA (38%) and the British Virgin Islands (8%). The report also notes that the survey results were based on the responses of the fund managers and had not been independently verified.

"Significant" growth expected

The report also finds that "the launch of actively managed crypto funds is strongly correlated with the price of bitcoin (BTC) "AND" The rise in Bitcoin prices in 2018 seems to have been a catalyst for the launch of more crypto funds. "

After the third halving of Bitcoin, many people expect the price of bitcoin to rise by the end of the year. Among them, Galaxy Digital CEO Mike Novogratz, who believes that the price of bitcoin would reach $ 20,000 in December. Virgin Galactic president Chamath Palihapitiya said the price of bitcoin could reach $ 1 million or more, while Pantera Capital CEO Dan Morehead said it could peak $ 115,000 in August of next year. .

Another bullish move for the crypto industry comes from hedge fund manager Paul Tudor Jones, who revealed on Monday that he had nearly 2% of his assets in bitcoin. He explained that he was buying bitcoin as a hedge against inflation and monetary printing from central banks, because bitcoin reminds him of the role played by gold in the 1970s.

PWC partner and world leader in cryptography, Henri Arslanian, told Bloomberg on Friday: "The volatility of the crypto markets offers many opportunities for quantitative traders … The performance of crypto funds tends to be more related to market volatility as market performance. "He explained:

I expect the crypto hedge fund industry to grow significantly in the years to come, as investing in a crypto fund may be the easiest and easiest entry point. more familiar to many institutional investors looking to enter this space.

Several analysts predicted that interest in cryptocurrencies from institutional investors would increase after the Covid-19 pandemic. Last month, a Japanese analyst pointed out three main reasons why the institutional demand for cryptocurrencies would increase after the coronavirus crisis. Grayscale Investments recently released its first quarter 2020 results report, showing record capital inflows, 88% of which came from institutional investors. In addition, a pro-crypto commissioner from the U.S. Securities and Exchange Commission. The United States, Hester Peirce, has said it is seeing institutional demand increase.

What do you think of hedge funds that are increasingly investing in cryptocurrencies? Let us know in the comment section.

Image credits: Shutterstock, Pixabay, Wiki Commons, PWC, Elwood Asset Management

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