The Surge of Crypto Funds Over the Years
It’s fascinating how crypto funds have skyrocketed in popularity over just six short years. In 2017 alone, we witnessed the birth of 224 new funds, and that number grew to 239 in 2018. However, predictions for 2019 suggested a decline in new funds. Despite this, proprietary research shows that the crypto fund industry is likely to keep evolving. The resilience of these funds during market downturns is just one of the many remarkable aspects of this upward trajectory.
A Breakdown of Crypto Fund Types
So, what exactly constitutes a crypto fund? Generally speaking, they fall into two primary categories: hedge funds and venture capital funds. According to current data, the landscape comprises:
- 369 crypto hedge funds
- 421 venture capital funds
- And a mix of crypto ETFs and private equity funds
This diversification has led to increased funding options for blockchain startups, as traditional VC firms eagerly dive into this growing market.
Size Matters—or Does It?
Despite their growth, crypto funds are still a far cry from their traditional counterparts. A recent report indicated that over 60% of crypto funds manage less than $10 million in assets. In comparison, traditional hedge funds laugh at these numbers, hoarding a whopping 99% of the total assets in the market. Yes, this means a significant chunk of crypto funds operates on a small scale with just a few employees, but hold on! There are notable exceptions, with some funds controlling assets over $1 billion. So, while they may be small, they can still dream big!
Performance: Crypto Funds vs. Bitcoin
In a surprising twist, crypto funds have been clocking in fantastic returns, often outpacing Bitcoin, the cryptocurrency heavyweight. The Crypto Fund Research Cryptocurrency Fund Index (CFR Crypto index) has shown incredible performance, with over 1400% gains as compared to Bitcoin’s 100% increase from January 2017 to June 2019. Not only are these funds defying the odds, but they’ve done so even in the face of a bear market.
Weathering the Storm: Crypto Funds in a Bear Market
The brutal bear market of 2018 might have sent many investors running for the hills, but not crypto funds. Instead, they used this period to scout for promising blockchain projects and provide the necessary funding. Unlike traditional hedge funds, which tend to show age-related performance declines, the younger median age of crypto funds (only 16 months) appears to have given them a competitive edge. Fresh perspectives, after all, no one wants to take investment advice from the grandparent of hedge funds, right?
The Global Landscape of Crypto Funds
Interestingly, the United States claims home turf for 64% of all crypto funds. Other notable locations include the Cayman Islands, the UK, and Australia. Yet, despite this concentration, many funds are still operating under a cloak of regulatory uncertainty, especially with the ongoing developments from entities like the SEC regarding ICOs and security tokens. As regulations evolve, the ability for these funds to thrive could bear significant implications for the crypto landscape as a whole.
In summary, while crypto funds may be somewhat of the underdogs in comparison to traditional financial vehicles, their growth trajectory and performance, particularly during challenging market conditions, tell a promising story. And as regulation catches up to innovation, the future is looking bright—for funds, startups, and investors alike.
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