Hedge funds see the falling crypto market as an investment opportunity
Cryptocurrency market cap has fallen more than 40% from its high of $ 2.5 trillion in early May, but institutional investors continue to flock to the market. Although Bitcoin (BTC) is losing more than half of its value in US dollars and altcoins are falling by almost 70% on average, big money players like hedge funds continue to take crypto investment positions.
From direct exposure to cryptocurrencies to helping companies develop digital asset products and services, institutional investors are building a more substantial presence in the cryptocurrency and blockchain space. Back in June, a survey of 100 hedge fund CFOs around the world indicated an expected increase in the crypto-to-hedge fund ratio over 5 years.
As regulated companies continue to examine investment options for digital currencies, crypto regulations also appear to be taking shape in many jurisdictions. In the United States, regulators like the Securities and Exchange Commission are under considerable pressure to enact stricter regulatory frameworks for cryptocurrencies.
The reputation for investing in crypto remains strong
In early July, Cointelegraph reported that London-based hedge fund giant Marshall Wace had built a portfolio focused on digital assets. According to the report, the $ 55 billion hedge fund is targeting late-stage funding for digital finance companies and blockchain companies working on use cases like payment systems for money, digital and stablecoins.
Amit Rajpal, CEO of Marshall Wace Asia Limited, outlined the company’s position on investing in digital assets and stated that the focus will be on projects aimed at redefining financial services, particularly in the area of payments. According to Rajpal, digital finance is changing the architecture of the underlying financial system.
Even before crypto-focused portfolio reports surfaced, Marshall Wace was already making several forays into the field of digital assets. Back in May, the hedge fund participated in a $ 440 million financing round from stablecoin issuer USD Coin (USDC).
Marshall Wace is just the latest in a growing list of hedge funds and other institutional investors exploring crypto investment options. In April, British wealth management company Brevan Howard launched a $ 84 million crypto mutual fund.
In conversation with Cointelegraph China In early July, Cornell University professor and Avalanche inventor Emin Gün Sirer stated that the current market downturn had dampened institutional investors’ enthusiasm for crypto exposure. According to Sirer, the legitimacy of cryptocurrencies as an asset class is “undeniable”:
“I have had contacts from pension funds, not from hedge funds, but from pension funds. A completely different piece that moves much more slowly but has maybe ten times as many dollars under your control and they are slowly finding their way into cryptocurrency. “
Joe DiPasquale, CEO of crypto hedge fund BitBull Capital, also agreed with Sirer’s comments, telling Cointelegraph, “Institutional investors remain interested and continue to build positions at important levels.”
BitBull Capital CEO added, “Of course the market hype has subsided, but these downturns are historic opportunities for long-term entry.
A spokesperson for Nickel Digital Asset Management, a $ 200 million crypto hedge fund, also provided insight into new strategies being used by institutional players in the crypto trading landscape. Speaking to Cointelegraph, a Nickel Digital representative said, “We see active and ongoing engagement from the entire institutional community including (but not limited to) pensions, foundations, endowments, etc. grants and hedge funds of funds,” added:
“The recent volatility has proven to be an opportunity for certain trading strategies (like market-neutral arbitrage) while it is a headwind for others (beta exposes financial assets). underlying crypto asset). In fact, it creates an immediate demand for hedge funds with lower volatility. Investment objective, size, and risk tolerance are important factors when evaluating any investment opportunity, especially in crypto. “
In fact, Nickel Digital recently rebalanced its liquidity position in response to the recent market decline, in what the company calls an exercise in “financial discipline”. According to the fund’s CEO Anatoly Crachilov, Nickel Digital is keeping its investment powder dry in order to generate parabolic price gains in the crypto market in the future.
Big money players welcome more crypto regulation
As more institutional actors launch crypto attacks, stakeholders say asset managers are not concerned about regulatory risk. Indeed, much of the attention of financial regulators seems to be focused on protecting retail investors.
In the meantime, banks and other regulated companies appear to be getting clearer mandates from regulators on how to interact with digital assets. A Nickel Digital spokesperson commented on the benefits of introducing clear rules for cryptocurrencies to Cointelegraph:
“We accept regulation because we believe that regulation brings clarity and clarity leads to broader participation in the market. Cryptocurrencies have been regulated in the US for years and the recent changes in Germany could free billions of dollars into the crypto space. “
At the beginning of July, the authorities in Germany issued a groundbreaking decision that allows institutional funds to invest up to 20% of their assets under management in cryptocurrencies. The move takes place despite warnings from the Federal Financial Supervisory Authority about the risk of speculation.
With the new legislation in Germany, investments worth up to 415 billion US dollars are likely to flow into the crypto space. The German Fund Allocation Act also surpassed previous regulations that equate security tokens with other regulated investment vehicles in the country.
DiPasquale told Cointelegraph to address concerns about government oversight with a negative impact on institutional involvement of cryptocurrencies in the future. “
The cops will be back in the fall
If the current crypto downturn is a prime investment option for hedge funds and other institutional investors, such a strategy is most likely based on expectations of a future market recovery. As previously reported by Cointelegraph, Sirer has predicted that sideways accumulation will dominate crypto price movement in the summer months.
In fact, Bitcoin has been in a range between the price points of $ 32,000 and $ 36,000 since it fell by more than 50%. The lack of a significant breakout in Bitcoin almost means a repetition of small price drops and pumps in the crypto market.
However, Sirer said he expected a return to parabolic price action in the fourth quarter. According to the Avalanche founder, the revival should begin in October or November.
“I’m very excited about what’s to come because I know there is a lot of interest in institutions, retail and new technologies that are going to change this world. […] We are at the beginning of a very large movement to restructure the entire financial infrastructure. “
“The bear market is really great to get the job done. The financial transformation won’t stop because we’ve seen a relative price correction, ”added Sirer. Cointelegraph China. The Cornell University professor also stated that serious interest groups are using the current period as a time for consolidation and growth.
Connected: Avalanche founder Emin Gün Sirer ‘pretty optimistic’ about the outlook for the crypto market
Like Rajpal of Sirer and Marshall Wace, there is a growing belief that the crypto and blockchain space is on the way to improving the global financial system, hence the growing interest from institutions. Even on the retail side, regulated institutions such as banks are increasingly interested in offering crypto-related services.
Given that millions of dollars are pouring into the account vaults of exchanges like Coinbase every day, companies like NYDIG say U.S. banks are keen to join the promotion and provide services. Bitcoin transactions for account holders. As a result, the company recently announced a series of partnerships that will enable cryptocurrency trading directly from customers’ bank accounts in the United States.
BitBull’s DiPasquale also mentioned the possibility of a bull market returning in 2021, but gave a date closer to the winter period, adding, “We could see a return in 2021, yes, but the parabolic surge may not be until December or December Observed early next year. However, DiPasquale predicts that Bitcoin will end the year trading above the $ 50,000 mark.