The top 10 crypto hedge funds
Cryptocurrencies have been around for more than a decade but as an asset class they’re still considered on the fringes. Institutions see crypto as a brand new industry in a highly unregulated space, and governments don’t provide the backing they do for fiat currencies. For investors, that means high-risk.
Despite its risk profile people do make money investing in coins – lots of it – and that pairing of high-risk with potentially high reward has proven irresistible to hedge funds and high frequency trading funds.
Crypto hedge funds pool money from investors and invest on their behalf in virtual currencies. The coins selected for investment are at the discretion of the fund manager. It could be a more established cryptocurrency like Bitcoin, a challenger like Ethereum, or an altcoin like Ripple’s XRP. The fund manager normally selects the coins they perceive to offer the highest potential returns and use multiple strategies like high frequency trading, arbitrage strategies, long-term hold positions, triangular arbitrage, ICO investments, IEO investments and leveraged trading and shorting to manage portfolio risk.
Investing through hedge funds can be effective for investors who don’t have the time or know-how to trade profitably in cryptocurrencies. Profits are earned passively as all trading transactions are conducted and overseen by the fund’s managers. As a specialist area, Hedge fund managers need a specialist skill set, as they have to understand both the technical and economic fundamentals that affect the value of crypto assets.
It hasn’t all been smooth sailing for crypto hedge funds however. The long bear market forced many to shut and others to find new ways to stay afloat. A study by Crypto Fund Research says more than 35 cryptocurrency funds closed their doors in 2018. As in all forms of investment, failure definitely is an option. It pays to do your research.
My top 10 list of the best crypto hedge funds currently:
This is arguably the biggest crypto hedge fund with an asset base of ca. $1.6 billion. Founder Barry Silbert is an evangelist for the future of virtual currencies. The fund had an exceptionally good 2018 – raking in $330 million despite the onset of the crypto bear market.
Another large fund, Pantera manages over $700 million over five cryptocurrency funds. The entry point is a minimum $100,000 investment, making it more suited to institutional investors or high-net-worth individuals. Pantera has been around since 2013, comparatively ancient for a cryptocurrency hedge fund.
BitSpread has over $100 million under management. The fund is market maker offering both buy and sell prices on crypto-currencies, utility tokens and security tokens traded on regulated exchanges. It averages ca. 5,000 transactions daily, for a monthly trading volume of about $1 billion.
BitcoinsReserve runs a unique cryptocurrency hedge fund called Arbitrage which uses automation to trade across multiple cryptocurrency exchanges. Many cryptocurrencies trade at different prices depending on the exchange, so Arbitrage managers look to gain profits by taking advantage of price differentials. BitcoinsReserve is one of the more accessible funds for the average investor.
CoinCapital invests in cryptocurrencies, blockchain startups, and individual coin offerings. Managed by a team that has marketing, sales, and finance backgrounds, Coin Capital is more suited to individual investors – though they are looking for people with a net worth in excess of $2.1 million. They manage more than 40 different cryptocurrencies including Ethereum, Bitcoin, Ripple, and Dash.
Brian Kelly Capital Management (BKCM)
One of the new entrants on the list, BKCM already manages assets worth $50 million. Investors can take advantage of a three-tiered investment approach, with buy-and-hold taking 50%, ICOs taking 20%, and the rest being managed by the firm. Founder Brian Kelly has said he has 90 percent of his personal wealth in cryptocurrency.
Blackmoon is both an investment fund and a platform for the creation of new hedge funds. It engages in both digital and traditional investments, and enables other hedge fund managers to establish crypto funds of their own. Blackmoon also helps fund managers achieve legal compliance, further reducing risk for its high-net-worth investors.
Silver 8 Capital
Jersey-based Silver 8 manages more than $300 million in client funds. In addition to managing crypto investments, the company also invests in promising cryptocurrency and blockchain projects. In 2017 Silver 8’s fund returned 770.74 percent – one of top performing funds of that year.
BitBull launched in 2016. It is relatively open to all types of investors and doesn’t charge any fees. However it requires a minimum investment of $100,000 for entry. Bitbull also provides venture capital funding to promising cryptocurrency projects. Earlier this year it announced that its Opportunistic Fund had returned more than 29% since its launch in November 2018, beating Bitcoin returns by 70 per cent.
General Crypto focuses its investment activities in digital currencies that offer solutions to real-world problems. GC selected Ripple for investment because it is designed to speed up and simplify international money transfers. The firm has an asset base of over $25 million.