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$2 Billion Cryptocurrency Hedge Fund Industry Set to ‘Grow Significantly’

Cryptocurrency hedge funds’ belongings below administration have been growing considerably, rising to greater than $2 billion on the finish of final yr, based on a latest survey. The crypto hedge fund business is predicted to “develop considerably” together with the value of bitcoin.

Hedge Funds’ AUMs Doubled in 2019

Cryptocurrency hedge funds’ belongings below administration greater than doubled in 2019, based on a brand new survey by PWC and Elwood Asset Management Services Ltd. Entitled “2020 Crypto Hedge Fund Report,” the doc was revealed on May 11, the day of the third Bitcoin halving. The information comes from “the biggest world crypto hedge funds by belongings below administration (AUM),” the report particulars, including that it contains crypto index funds and crypto enterprise capital funds.

“Our Q1 2020 analysis reveals that there are round 150 lively crypto hedge funds. Almost two thirds of those (63%) had been launched in 2018 or 2019,” the report’s authors wrote, elaborating:

We estimate that the overall AUM of crypto hedge funds globally elevated in 2019 to over US$2 billion from US$1 billion the earlier yr … The common AUM elevated from US$21.9 million to US$44 million.

Most cryptocurrency hedge funds surveyed (97%) traded BTC, adopted by ETH at 67%, XRP at 38%, LTC at 38%, BCH at 31%, and EOS at 25%. The substantial improve in AUM is also attributed to the rise within the costs of cryptocurrencies. Bitcoin’s worth, for instance, rose from $3,872 on Jan. 1 final yr to $7,174 on Dec. 31.

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$2 Billion Cryptocurrency Hedge Fund Industry Set to 'Grow Significantly'The prime cryptocurrencies traded by crypto hedge funds surveyed by PWC and Elwood Asset Management. Source: Report by PWC and Elwood.

The median AUM at fund launch is $2 million in 2019, “indicating that funds have typically seen a 4X improve in AUM,” the report emphasizes. During the yr, the proportion of crypto hedge funds utilizing an unbiased custodian elevated from 52% to 81% and 86% used an unbiased fund administrator. About 90% of hedge fund buyers had been both household places of work (48%) or high-net-worth people (42%). A small share of respondents had been foundations, endowments, venture-capital funds or funds-of-funds however none cited pension funds.

Furthermore, cryptocurrency hedge funds are usually domiciled in the identical jurisdictions as conventional hedge funds, most of that are within the Cayman Islands (42%), adopted by the U.S. (38%) and the British Virgin Islands (8%). The report additionally factors out that the survey outcomes had been primarily based on solutions by fund managers and weren’t verified by an unbiased get together.

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‘Significant’ Growth Expected

The report moreover finds that “the launch of actively managed crypto funds is extremely correlated with the value of bitcoin (BTC)” and “The Bitcoin worth spike in 2018 seems to have been a catalyst for additional crypto funds to launch.”

$2 Billion Cryptocurrency Hedge Fund Industry Set to 'Grow Significantly'The variety of new cryptocurrency hedge funds launched from 2012 to Q1 2020. Source: Report by PWC and Elwood.

After the third Bitcoin halving, many individuals count on the value of bitcoin to rise by the top of the yr. Among them is Galaxy Digital CEO Mike Novogratz who believes that the value of bitcoin would hit $20,000 by December. Virgin Galactic Chairman Chamath Palihapitiya has been saying that bitcoin’s worth might go to $1 million or extra whereas Pantera Capital CEO Dan Morehead stated it might peak at $115,000 by August subsequent yr.

Another bullish transfer for the crypto business comes from the hedge fund supervisor Paul Tudor Jones who revealed on Monday that he has virtually 2% of his belongings in bitcoin. He defined that he’s shopping for bitcoin as a hedge towards the inflation and central banks’ cash printing, as bitcoin reminds him of the function gold performed within the 1970s.

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PWC companion and world crypto chief Henri Arslanian was quoted by Bloomberg on Friday as saying: “The volatility of crypto markets gives many alternatives for quant merchants … The efficiency of crypto quant funds tends to be extra linked with market volatility moderately than market efficiency.” He elaborated:

I count on the crypto hedge fund business to develop considerably over the approaching years as investing in a crypto fund would be the best and most acquainted entry level for a lot of institutional buyers getting into this area.

Several analysts have predicted that curiosity in cryptocurrencies from institutional buyers will improve publish the covid-19 pandemic. Last month, a Japanese analyst outlined three key the reason why institutional demand for cryptocurrencies would rise after the coronavirus disaster. Grayscale Investments lately launched its Q1 2020 earnings report displaying report capital inflows, 88% of which had been from institutional buyers. Furthermore, a pro-crypto commissioner with the U.S. Securities and Exchange Commission, Hester Peirce, stated she sees institutional demand rising.

What do you consider hedge funds more and more investing in cryptocurrencies? Let us know within the feedback part beneath.

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