By Shelly Melancon (Switzerland)
Within the past two weeks, the crypto market has declined by over 30%, from about $2.5 trillion to about $1.73 trillion. But this drop has deterred the interest of hedge funds in digital currencies.
Users often use hedge fund platforms to invest funds in a selected combination of cryptocurrencies, such as the crypto Copyfund. Venture capitalists use these funds to track and compare the price and market trends of bitcoin with the popular cryptocurrencies such as internet computer, USD coin, Binance coin, DASH, Aave, XRP, Dogecoin, Ethereum, and Cardano.
A Cap To The Number Of Hedge Funds Investing In Cryptocurrency?
As of this writing, there are over 200 active cryptocurrency hedge funds (CHFs). Interestingly, 80% of them were released within the last four years. In addition, 54% of venture capitalists in virtual currency hedge funds are high net worth individuals, while 30% of them are family offices.
A recent PWC crypto hedge fund survey suggests that a little over $1 million is the average investment ticket size, while approximately $400K is the median ITS. Interest levels from institutional venture capitalists have caused changes to the composition of the investor base. Right now, the median number of venture capitalists in most hedge funds is about 24.
Rising Interest In Investment
In the year 2017, almost 200 crypto funds were rolled out because the year saw a higher awareness about cryptocurrency and a rise in the price of most coins. In addition, almost 700 hedge funds had been launched before the end of that year. Last year, the total asset under the management of hedge funds globally peaked at about $3.9 billion, a $1.9 billion or a 90% increase from the figure recorded for the previous year.
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Most exchanges trade in bitcoin, Ethereum, Litecoin, Chainlink, and Polkadot in that order. They use the services of decentralized crypto exchanges (DEX) to achieve safe and direct P2P digital asset trades and without involving any third party in the transaction. Popular DEXs used include Coinmama, linch, eToro, Uniswap, Coinbase, Kraken, Binance, and Sushiswap. However, 16% of these CHFs use Uniswap, which makes the DEX the most preferred option. Linch and Sushiswap round up the top three most used DEX by CHFs.
Humans are commonly affected by the herd mentality; whatever the majority uses is considered the best. Hence, most investors invest in the coins invested in by hedge funds. Consequently, the price of these coins’ skyrocket and cause a boom in the whole crypto market space. Hence, this might make bitcoin exceed the $40K price, reach $65K, and even exceed it. It is a proven fact that bitcoin price and value will skyrocket more as its popularity as an exchange medium or investment soar among investors, institutions, and the general populace.
This happens because bitcoin will be obeying the law of supply and demand, which states that the higher the demand (for bitcoin), the lower the supply and, consequently, a price rise. As a result, new CHFs will keep emerging regardless of what happens in the crypto asset space, and they continue to enjoy outstanding returns.
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