Crypto Funds Had Massive Return And Surpassed The Traditional Hedge Funds Due To The Booming Cycle Of Crypto In 2021

2021 was a boom year for the cryptocurrency industry. As a result, crypto funds’ profit in 2021 was significantly higher than that of traditional hedge funds.

Hedge funds have not seen the expected explosive increase in profits in the previous year despite the stock market’s incredible performance. In contrast, crypto funds outperformed both stock and digital asset benchmarks.

Hedge funds returned a little more than 10% on average last year, lagging both the S&P 500 index’s return of 26.9% and the hedge fund industry’s overall performance in 2020. The S&P 500 Index, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an exact list of the top 500 U.S. companies by market cap because there are other criteria that the index includes. Still, the S&P 500 index is regarded as one of the best gauges of prominent American equities’ performance, and by extension, that of the stock market overall.

The underexposure of hedge fund managers to huge tech names like Apple and Tesla, which notched in eye-watering profits in 2021, is linked to their disappointing performance.

Crypto funds had an absolutely different story. Most of the crypto funds had a massive return due to the explosion of the market last year. According to Hedge Fund Research, crypto hedge funds returned 214% on average. Aside from the 2017 boom cycle, crypto hedge funds have had their most extraordinary year ever.

“TradFi Hedge fund portfolios look very similar, and passive indexes largely outperform active management in today’s picked over the market. Contrast that to digital assets, and there really isn’t much competition at all yet,” Jeff Dorman, the Chief Investment Officer at crypto investment management firm Arca.

“The sweet spot for active management is a growing and evolving investment opportunity set without growing competition, and that’s where we stand today,” he said. “Due to regulatory issues, size constraints, and lack of education, large TradFi funds have not penetrated digital assets in any meaningful way outside of buying a few private deals, and trading BTC and ETH.”

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