Crypto hedge funds are launching at a fast pace and are further expected to rise despite the crypto market being a bear one defying the notion of the traditional market. Though crypto hedge funds rise is a “global phenomenon”, the US is leading the race with more than half of these funds.
Crypto hedge funds defies the traditional market notion
According to the latest report by Crypto Fund Research, about 90 crypto hedge fund has been launched in the first three quarters of this year. Now, this number is on track to reach 120 for this fiscal year.
This fact defies the traditional notion that hedge funds tend to launch in bull markets as 2018 has been a bear market for the cryptocurrencies. Bitcoin (BTC), Ethereum (ETH), among others are down more than 60 percent TYD 2018. Additionally, crypto hedge funds primarily invest in cryptos like Bitcoin, Ethereum and XRP.
Joshua Gnaizda, the founder of Crypto Fund Research stated about this rise in the crypto hedge funds:
“In the midst of 2018’s decline in traditional hedge fund launches, crypto hedge funds are a notable aberration. Cryptocurrency prices have been in a bear market for the better part of the year and regulatory uncertainty persists in much of the world. Yet these seemingly unfavorable market conditions have not deterred managers from launching new crypto hedge funds at a record pace. While we don’t believe the rate of new launches is sustainable longer-term, there are currently few signs of a significant slowdown.”
Crypto hedge funds to surging further
As per the Hedge Fund Research, about 600 hedge funds are expected to launch in 2018 for both traditional and crypto market. Out of this, 20 percent i.e. 120 will be crypto hedge funds. In 2016, these funds accounted for less than 3 percent which surged in 2017 reaching 16 percent. Actually this year, “Two-thirds of all currently operational crypto funds have launched in the last seven quarters, through Q3 2018.”
The research further points out crypto hedge funds are one of the fastest growing hedge fund strategies now. But still, it makes up a small percentage of the overall industry in terms of assets under management and raw numbers.
“According to Crypto Fund Research, there are currently 303 crypto hedge funds. Crypto-focused hedge funds comprise just 3% of the more than 9,000 hedge funds currently in operation. Crypto hedge fund assets, at less than $4 billion, are also still quite meager. The global hedge fund industry, by comparison, manages more than $3 trillion.”
Currently, there are 622 crypto funds of all types. These crypto hedge funds involve “just under half of the broader class of crypto funds,” covering crypto venture capital and crypto private equity funds as well.
As for which country is seeing the most growth, the research notes half of the crypto hedge funds launched are from the US. However, the rise of the crypto fund is a “global phenomenon” as the United Kingdom, Switzerland, China, Australia, The Netherlands, and Malta also saw multiple crypto hedge funds this year.