Cryptocurrency Hedge Funds Gained More Than 1,000% In 2017

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Cryptocurrency Hedge Funds Gained More Than 1,000% In 2017

Some hedge funds that had just entered the bitcoin market performed extraordinarily well in 2017. (See also: The Crypto Hedge Fund’s Rise.)

Although cryptocurrencies have gained in popularity among individual investors, institutional investors and conventional financial institutions have yet to embrace the trend in big numbers. There are several possible explanations for this, including the perception of cryptocurrencies as extremely speculative and dangerous investments, and many top financial experts feel the whole sector is a bubble about to burst. However, nine crypto hedge funds outperformed the market last year.

1,167% Growth in 2017

According to a recent Bloomberg study, the combined value of nine hedge funds tied to cryptocurrency investments increased by 1,167%. This data originates from Eurekahedge Pte and was published as a preliminary statistic apart from other figures like as assets under management and individual returns.

In contrast, hedge funds as a worldwide group generated returns of 8% in the previous year. Notably, the performance of these nine cryptocurrency funds underperformed that of bitcoin, which gained 1,403% in 2017.

More Than Speculation

While many hedge fund managers and other elite investors are still hesitant to enter the cryptocurrency field, those who have done so have discovered that they have access to more than simply speculation on growing currency values. (See also: A New $500 Million Cryptocurrency Hedge Fund.)

Strategies for cryptocurrency hedge funds may include early-stage equity investment, lending, and market creating. 2017 was not a good year in several of those circumstances. However, in the future, they may give some protection against big downturns in the digital currency market.

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Nonetheless, even this thriving sector of the hedge fund industry realizes the enormous risk inherent in the Bitcoin business. Altana Digital Currency Fund, which earned approximately 1,500% after fees in 2017, advised its customers to only invest a small fraction of their net worth in cryptocurrencies. There is still the very real risk that a cryptocurrency investor may lose all of the money she has allocated to the space if the bubble bursts. (See also: Hedge Funds Reap Spectacular Cryptocurrency Returns.)

Many of the hedge funds tied to cryptocurrencies are very new, having been established in recent years to profit on the industry’s fast expansion. As the digital currency market evolves and changes, more hedge funds may take suit, if earnings are still accessible.

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and this article is not a suggestion byInvestopedia or the author to do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author owns cryptocurrencies as of the day this post was published.

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