Hedge funds have long been a popular choice for risk-averse investors and rely on the fund’s visionary founder and teams of analysts to guide their money in the right direction. Whether led by Ray Dalio, George Soros or another famous mogul, the best funds constantly seek out the next edge, even if they already outperform the market each year. With the rise of cryptocurrencies like Bitcoin, they may have finally found it. Timing, however, is vital.
The massive percentage growth of Bitcoin, even in the face of extreme stress testing, has legitimized it in the eyes of investors everywhere. Accessible infrastructure makes transacting via the blockchain easy, and people can exchange crypto with fiat currency–opening the waters to the big fish.
This has created the perfect entry for hedge funds. Giant, influential funds see a comparatively small-volume asset like Bitcoin (which recently hit $100 billion market capitalization), plus demand in the investing populace, and have finally taken the plunge. New funds are emerging as well. This development has been met with both dismay and accolades in the crypto community, but one thing is for certain: returns so far have been astounding.
What is a Crypto Hedge Fund?
Unlike a cryptocurrency index fund, an ETF, or an exchange, a hedge fund is a different way for a person to invest in a large group of underlying securities. These are managed by teams of expert investors, re-balanced on occasion, and endlessly analyzed. Investors receive profits from these experts’ market maneuvers. At present, there are two kinds of cryptocurrency hedge funds. Those that manage portfolios containing exclusively cryptocurrency, and those that have added some cryptocurrency to a mix of other asset types.
The former type of hedge fund seeks to maximize returns by adding newly offered coins (ICOs) to the mix, to replicate the 82,000% returns that the Ethereum ICO achieved, for instance. The latter are arguably more risk-averse, but are less profitable, given cryptocurrency’s stellar rise.
Who Can Benefit?
Those who want to get in on Bitcoin’s growth, for example, can make an account with the eToro Cryptofund. This hedge fund platform allows individuals to invest in a carefully selected mix of cryptocurrencies such as the Crypto CopyFund. This fund provides investors the ability to mirror the market movements of Bitcoin and other established coins such as Ethereum, Ripple, and Dash.