At least nine cryptocurrency-focused hedge funds were shuttered in the first three months of 2018, Bloomberg reported Monday.
The closures include the Crowd Crypto Fund and Alpha Protocol, the news service reported. While Crowd Crypto Fund shut down all of its digital platforms, including its social media presence, Alpha Protocol simply announced it was refunding its investors all of their funds. According to the fund's website, the refunds were completed on March 31.
Even hedge funds that are more firmly established have seen decreased interest from investors. Bloomberg cited as an example Multicoin Capital, whose co-founder, Kyle Samani, told the news organization that "new capital has slowed, even for a higher-profile fund like ours."
The news comes amid a broader decline in the returns these funds receive, the news organization said. Cryptocurrency hedge funds are seeing their returns drop an average of 23 percent, a figure which is not helped by a bear market which brought token prices down to some of the lowest levels since last year.
Indeed, only two of the top 25 cryptocurrencies by market cap saw gains in the first quarter of 2018, as previously reported. The overall market capitalization fell from $830 billion in early January to $251 billion last week.
Bloomberg noted that more than 200 cryptocurrency-related hedge funds have launched over the last several years. The article quoted Lex Sokolin, global director of fintech strategy at Autonomous Research LLP, as predicting that roughly 10 percent of these will shut down by January 2019.
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It’s interesting to see the downfall of crypto hedge funds falling down. These funds don’t all utilize the same methodology, and there is broad strategic differentiation that mimics the traditional investment markets. It’s no surprise that hedge funds became so popular. It’s important to remember that crypto markets are still a new investment vehicle, and it’s easy to confuse singular events with broad characteristics. These hasty generalizations abound among industry pundits, but the reality is far more mundane. There isn’t as much strategy and intentionality in running a crypto hedge fund as some might think. In many ways, their genius is taking a financial stake in an asset that is just not beginning to mature.
