No one can deny a lot of hedge fund managers are paying closer attention to Bitcoin and other cryptocurrencies these days. So much so, in fact, that quite a few of them have incorporated cryptocurrency holdings into their lists of supported currencies. According to some sources, there are over 120 hedge funds which focus on cryptocurrency exclusively. That’s an interesting number that will only continue to rise moving forward.
Although it may seem like a rather strange mix, there is an interesting correlation between hedge funds and cryptocurrencies. A hedge fund allows people to make strategic investments through exposure to volatile assets in the hopes of making a profit. While there have been plenty of “traditional” investment opportunities already, a lot of hedge fund managers are looking for new and creative ways to make their products more appealing.
Cryptocurrency presents a very enticing opportunity in this regard. Not only is it one of the more volatile industries in existence today, it also provides people with a legitimate chance to make a healthy profit. Not everyone wants to buy Bitcoin or altcoins directly, for obvious reasons. A hedge fund can provide those individuals with the desired cryptocurrency exposure through a more traditional investment vehicle.
The year 2017 has been especially promising for cryptocurrency-related hedge funds. More specifically, over 90 of these funds have launched in this year alone. These funds provide direct exposure to Bitcoin as well as popular altcoins including Ethereum and even Litecoin. Autonomous Next projects the total number of financial firms providing exposure to cryptocurrencies now sits at 124, which is a rather impressive figure.
Surprisingly enough, the vast majority of hedge funds use a strategy that resembles the venture capitalist approach. Just over one-third of all hedge funds hold US$1.1 billion in combined assets on behalf of their customers. Companies focusing on trading digital assets are also pretty popular right now, as they manage US$700 million in assets at present. There is also a surprising amount of focus on the part of hedge funds in the areas of machine learning, data science, and statistical arbitrage.
All of this goes to show there is more than one valid approach when it comes to exposing investors to cryptocurrencies right now. That shouldn’t surprise anyone, but the overall growth is still pretty significant to take into account. Whether or not these markets will continue to grow as time progresses remains to be seen. The momentum is clearly in favor of cryptocurrencies right now, but the tide can always turn when one least expects it.
It also seems there are a lot of high expectations for some of the newly launched projects in this industry. While Bitcoin and Ethereum are the two main sources of investment right now, one shouldn’t overlook some of the smaller projects and digital tokens built for specific projects. It is evident ICOs also have a role to play when it comes to cryptocurrency-related hedge funds right now. Whether or not that is a good thing remains to be determined, though.
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