Crypto Hedge Funds Are Raising Hundreds of Millions Despite Bear Market
Cryptocurrency hedge funds continue raising record sums of money despite the crypto bear market.
It is no longer news that the cryptocurrency market has suffered its worst run in the market this year than any other since the inception of Bitcoin.
Over the last eight months, cryptocurrencies have suffered a nightmare of a run, with the entire market dropping more than 70 percent of its valuation in the process.
Many would expect that with the gross devaluation of the sector, investments would be on a decline too. Contrary to this, crypto hedge funds have revealed money raised is hitting all-time highs.
Hedge Funds benefit from the crypto market decline
Investors in the traditional finance market tend to favor greater investments particularly when there is a noticeable downtrend.
As a general rule, when the valuation of a market or an asset drops by more than 70 percent, more investors are attracted towards the investment as their is a larger upside.
Following a similar trend, investment and demand for Grayscale’s products and investment vehicles have been growing strongly in the U.S. market as digital assets face decline.
In July this year, investment company Grayscale (a subsidiary of Barry Silbert’s Digital Currency Group) disclosed raising $248 million in the first quarter of 2018, bringing its portfolio valuation to $2 billion.
In the report released in July, the Grayscale team stated that the demand for its hedge fund and the investment vehicles have seen an unprecedented acceleration rate.
“As the investment community knows, over the last six months, the digital asset market experienced one of the largest price drawdowns since the inception of Bitcoin in 2009. However, what is more interesting, and somewhat counterintuitive, is THAT the pace of investment into Grayscale products has accelerated to a level that we have not seen before. In fact, we raised nearly $250 million in new assets in the first half of this year, marking the strongest inflows of any six month period in the history of our business.”
Rise in demand for crypto hedge funds
Similar to Grayscale’s report, this week, Pantera Capital, announced that it raised $71.4 million from 90 investors, which forms its Third Venture Fund which now has a total capital of $175 million.
Pantera Capital is one of the only two-billion-dollar hedge fund in the cryptocurrency sector, the other being Grayscale.
The rise in demand from investors in the public would aid the establishment of a practical and efficient regulatory frameworks to govern crypto exchanges and protect investors.
Similarly, there have been positive developments in the space such as the Baakt initiative of Starbucks, New York Stock Exchange, and Microsoft which would improve the usability of digital assets.
Investors should look past the current state of the crypto market and focus on the positive aspect of the crypto market and invest in.
Bitcoin is currently trading around $7,000 which is almost 70% less of the all-time high it saw in December last year. The same can be said about almost all the digital assets.
The current valuation of digital assets is a key factor for the increased interests in cryptocurrency hedge funds which offer a relatively new asset class as a long-term investment.