New analysis reveals that one out of 5 hedge funds launched to date this 12 months has been a cryptocurrency-focused hedge fund. This is a shocking statistic in mild of the 2018 bear market, however it might point out that managers and buyers are nonetheless optimistic in regards to the long-term outlook and wish to capitalize on present low costs.
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Rapid Expansion by Segment
A complete of 90 cryptocurrency hedge funds have been launched in the primary three quarters of 2018, in line with information from Crypto Fund Research. Extrapolating a comparable charge for the ultimate quarter of the fiscal 12 months, 120 crypto hedge funds will seemingly be launched in 2018, or precisely 20 p.c of the 600 hedge funds that can in all probability begin working by the tip of this 12 months.
This is a fast enlargement of relative market share by phase, as crypto hedge funds accounted for simply 16 p.c of launches in 2017 and fewer than three p.c of new hedge funds in 2016. And because the report notes, two-thirds of all at the moment operational crypto funds have been launched inside the previous seven quarters (January 2017 to September 2018).
The analysis also reveals that about half of the crypto hedge funds launched this 12 months have been primarily based in the U.S. However, Australia, China, Malta, Switzerland, the Netherlands and the U.Okay have all seen a number of cryptocurrency hedge fund launches in 2018, too.
Drop in the Bucket
It is also necessary to keep in mind that whereas crypto funds are rising rapidly, they nonetheless account for a small fraction of the general business. There are at the moment solely 303 crypto hedge funds in operation, accounting for simply three p.c of greater than 9,000 hedge funds that exist all over the world. Crypto hedge funds also have lower than $four billion in belongings beneath administration, which is a drop in the bucket in comparison with the broader hedge fund business, which manages greater than $three trillion in belongings.
These figures don’t embrace crypto enterprise capital and crypto non-public fairness funds. Adding these to the entire, there are at the moment 622 crypto funds of all sorts now in operation, in line with Crypto Fund Research.
“In the midst of 2018’s decline in traditional hedge fund launches, crypto hedge funds are a notable aberration. Cryptocurrency prices have been in a bear market for the better part of the year and regulatory uncertainty persists in much of the world,” mentioned Joshua Gnaizda, founder of Crypto Fund Research. “Yet these seemingly unfavorable market conditions have not deterred managers from launching new crypto hedge funds at a record pace. While we don’t believe the rate of new launches is sustainable longer-term, there are currently few signs of a significant slowdown.”
Why are so many crypto hedge funds being launched in the present market? Share your ideas in the comments part below.
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