As the cryptocurrency industry continues to cement its legitimacy, more and more institutional investors are flocking to the sector for significant profits. However, the complexity and ever-evolving nature of digital assets has also led to the emergence of crypto-themed hedge funds. These activities aim to offer these investors diversified and safer investment products.
Diversification is the key
Their popularity and preference is reflected in the fact that crypto hedge funds managed to outperform Bitcoin in November, according to a recent Bloomberg report. While Bitcoin closed November with a loss of 6.5%, hedge funds with various crypto exposures only lost 2%.
In fact, Bitcoin has been struggling for almost a month as it continues to face resistance of around $ 50,000. Since hitting a new all-time high of over USD 69,000, the cryptocurrency has been on a downward trend. The same caused it to lose 31.9% of its value.
The savings option for hedge funds is portfolio diversification. This allows exposure to some promising altcoins.
The biggest example of this is Ethereum, with a similar gain of more than 500% last year compared to Bitcoin’s 67%. Similarly, there are other emerging altcoins like Solana, which is currently the fifth largest cryptocurrency with a 10,650% gain. Even Terra, which is up 14,748%, has given this fund additional returns
An NFT-focused fund
As the appetite for these products grows and their success continues, asset managers are expanding their offerings in innovative ways. Bitwise launched a new NFT-focused fund earlier this week to complement its growing suite of newly launched crypto products. Cryptocurrency investment firm Pantera Capital also recently raised $ 600 million for its fourth fund, with about 75% of the capital coming from institutional investors.
Recently, crypto hedge funds reached another major milestone when they posted a record weekly inflow of $ 1.5 billion when they launched the first BTC ETF in the US.
Source: CoinShares
That surge has cooled significantly since then, however, with the latest CoinShares report finding weekly investment inflows of $ 88 million (AUM) for the week ending December 10, while others saw an inflow of nearly 14% of their total AUMs. It also further states
“Opinions among investors are extremely polarized, with some panic selling occurring during this recent decline while others seeing it as an opportunity to buy … All Panic Selling The chaos last week focused solely on Bitcoin.”