The Financial Times has reported that profits for cryptocurrency hedge funds have taken a sharp decline, in direct correlation with the negative price action seen with the overall cryptocurrency market.
Cryptocurrency Hedge Funds Down 35% In 2018Hedge Fund Research, a reputable hedge fund analysis firm, has found that cryptocurrency hedge fund performance is down 35 percent in the first half of 2018 alone according to the FT. Despite posting an average gain of 45 percent in April, these hedge funds still declined in value over the other four months included in the HFR report. HFR’s research specifically targeted hedge funds that allocated a majority of its assets towards investing in cryptocurrency and blockchain projects alike.
However, it has become clear that these hedge funds took some action to mitigate risk, with the whole cryptocurrency market dropping by over 70%, but hedge funds only losing 35% on average since the start of the year.
This may have been due to the fact that these hedge funds invest into other classes of assets, which are still linked to the cryptocurrency industry. Some of these investments might have included startups, ICOs, and long-established cryptocurrencies firms that still produce profits in a market downtrend.
Despite 2018’s losses, the hedge funds analyzed were still profitable while looking at longer timeframes, with these funds increasing in value by over 2700% in 2017 alone. This staggering gain has been directly tied to the collective market cap of all cryptocurrencies, which rose by over 3000% in the span of 12 months.
Chart courtesy of CoinMarketCap
Seeing immense volatility in this market has sparked fear, and hope, with different groups of investors and speculators.
Henri Arslanian, the go-to representative for cryptocurrency analysis at the popular Asia-based consulting firm, PriceWaterhouseCooper, has said:
“I expect the crypto markets to remain volatile for the foreseeable future.”
Also adding that he believes that this volatility may be a profitable venture for cryptocurrency funds, contradicting traditional beliefs about volatility.
Blockchain Investment ‘Fever’ Rages In AsiaFunds have continued to open in this volatile market, specifically in Asia where investment interest still rages. Josh Gu, director of quantitative research at HFR said:
“Cryptocurrencies have been very volatile, (but) the topic is still hot in China and Japan.”
In the past few months, Asian blockchain and cryptocurrency firms, like Huobi, have moved towards creating cryptocurrency investment funds. Huobi actually ended up announcing two funds within the span of one month. One fund specifically being classified as a $1 billion blockchain launchpad, while the other being a $93 million collaborative fund with multiple South Korean banks.
These are just two of the many examples that show that the Asian market is still poised to invest in the cryptocurrency and blockchain industries, despite the overall decline in prices.
Although regulation around cryptocurrencies is still up for debate, Asian countries have seemed to embrace the idea of blockchain technologies, with China accepting blockchain with open arms. Earlier this month, China’s president came out in full support of blockchain technology, specifically mentioning blockchain in a speech dedicated to China’s growing role in technological development.
China’s stance in this growing industry has delighted some, as it has become apparent that Asian companies are willing to invest heavily in the space. This influx of investment is set to help expand adoption and development, with promising projects becoming a common sight within Asia’s borders.
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