I first started getting acquainted with Bitcoin in 2012 and continue to like potential and potential future digital assets that constitute a new alternative asset class.

A recent and often overlooked event is the rise of cryptocurrencies. Compared to the early days of cryptocurrency development, when there were mostly private investors or traders in the hall, a massive influx of professionals entered the market began with the rise of cryptocurrency hedge funds.

According to a survey by PricewaterhouseCoopers and Elwood Asset Management Services earlier this year, based on data from the world’s 150 largest cryptocurrency hedge funds, 63% of which were launched in 2018 and 2019.

On this topic: a cryptocurrency fund and a hedge fund amid the financial crisis

It is about the show
According to PwC’s annual Elwood Crypto Hedge Fund report, the most popular strategy for crypto hedge funds is quantitative strategy (48% of the funds) followed by long / short valuation (19%), long / short valuation (17%) and more. Strategies. (17%).

When it comes to the efficiency of cryptocurrencies, traditional cryptocurrencies have much better strategies than passive strategies (investing only in long positions), discretionary long / short strategies, and other strategies. In 2019, the average profitability of crypto hedge funds was determined by the strategies:

In 2018, which was a huge challenge for digital assets, quantitative trading was the only strategy with positive returns:

These numbers demonstrate that a regulated hedge fund is the best strategy for digital assets, but overall, all crypto hedge fund strategies are able to deliver stable alpha performance.

The ecosystem of crypto assets and crypto hedge funds is growing
The vast majority of crypto hedge fund investors are either family businesses or wealthy individuals. More and more money is being invested in crypto protections, which has led to a fairly rapid evolution of the entire ecosystem.

The fact that the share of crypto hedge funds with assets of more than $ 20 million nearly doubled last year to $ 44 million indicates that more funds are reaching a critical size to support the strategy.

More and more talent from the traditional hedge fund world is turning to digital assets, including large hedge funds like Paul Tudor Jones.

Wall Street has also become more open to Bitcoin (BTC) as a new asset class, and big names from Wall Street, including George Ball, the former CEO of Prudential Securities, have suggested that Bitcoin or other cryptocurrencies could provide investors with a safe haven. … … and traders as an alternative investment.

The news that MicroStrategy purchased $ 250 million bitcoin (60% of the Treasury) in August 2020: “Bitcoin is digital gold – harder, stronger, faster and smarter than any money spent before it” was a great catalyst. Smart investors look to the cryptocurrency markets.

Back in May 2020, I explained why Bitcoin is the ideal hedge against inflation, and institutional investors are increasingly turning to this new asset class when it comes to hedging. It is clear that investing in crypto hedge funds will make up the bulk of this additional capital inflow.

Significant growth in investment demand
When it comes to the transparency of the most regulated crypto hedge funds for outside investors in terms of the performance of funds and assets under management, investment growth is evident.

The total assets managed by crypto funds around the world doubled from 2018 to the end of 2019 (from $ 1 billion to $ 2 billion); There are clear indications that this number will nearly triple by the end of 2020. Compared to other alternative asset classes, these are still fairly small amounts, but the rate of growth indicates the direction the industry is headed in.

The increase in assets allocated to crypto hedge funds and other indications that Bitcoin is a digital asset and a new hedge against inflation show why and how investor demand has increased.

A fun time for the hedge fund
Given how talent is moving in the space and the increasing demand from institutional investors, I am confident of the near future.

It will be imperative for the industry to build a strong alpha level in the future and demonstrate that active investment strategies among crypto hedge funds outperform negative long-term approaches such as “hold”. So far, this service has proven to be more effective than successful crypto fund managers.

Source: CoinTelegraph