The violent crypto bear trend of 2018 has proved too much for many cryptocurrency hedge funds. The average performance of crypto funds has been a loss of over 20% so far this year, with at least nine crypto hedge funds having been reported to have ceased operations.
At Least 9 Cryptocurrency Hedge Funds Have Already Shut This Year
Reports are indicating that cryptocurrency hedge funds have experienced a significant reduction in demand for exposure – with many funds posting losses for 2018 so far, and others closing their doors entirely.
Among those to cease operations, are Crowd Crypto Fund and Alpha Protocol – with Alpha Protocol recently publishing a message informing investors, stating, “Considering the potential regulatory and market risks, Alpha Protocol has decided that the best approach is to refund the private sale contributors.”
In addition to the closures, several industry players have reneged on previous plans – with Sequoia and Andreessen Horowitz-backed Polychain Capital deciding againstconducting a Canadian initial public offering in January. Mike Novogratz also opting against launching a cryptocurrency fund in December, instead choosing to work on a merchant bank focused on crypto-related ventures.
Crypto Funds Produce Losses Over 20% in 2018 in Across January and February
According to Eurekahedge’s “Crypto-Currency Hedge Fund Index,” the average performance of crypto hedge funds in 2018 has been a loss of 23.31% as of March, with February alone producing an average loss of 18.75%.
Kyle Samani, the co-founder of Texas-based hedge fund Multicoin Capital, recently told Bloomberg that “New capital has slowed, even for a higher-profile fund like ours.” Multicoin’s fund launched in August 2017, and currently manages approximately $50 million in assets.
2017 Witnessed an Explosion in the Number of Cryptocurrency Hedge Funds
The speculative frenzy surrounding virtual currencies that pervaded throughout 2017 resulted in an explosion in the number of new cryptocurrency hedge funds last year.
According to research published by Autonomous Research LLP, 167 new crypto funds launched in 2017. This comprised a huge spike in the number of crypto hedge funds, with 19 having launched in 2016, 7 in 2015, 10 in 2014, and 2 in 2013. Thus far, 2018 has seen 20 new crypto funds launch.
Lex Sokolin, Autonomous Research LLP’s global director of fintech strategy, has predicted that up to 10 percent of cryptocurrency funds may cease operations by 2019.
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