Key Takeaways
- • Crypto Fund Research reports 90 crypto hedge funds launched globally in 2018 year-to-date, on pace to reach 120 by year-end, which would equal 20% of all hedge fund launches in 2018.
- • Crypto funds' share of new hedge fund launches rose from 3% in 2016 to 16% in 2017, showing rapid growth in launch activity.
- • Despite launch growth, crypto hedge fund assets remain under $4 billion, against a global hedge fund industry managing more than $3 trillion.
- • Institutional investors remain cautious due to extreme price volatility, regulatory uncertainty, fraud risk, and new enforcement actions against crypto firms.
- • Bitcoin fell about 66% from its January 2018 peak, and total cryptocurrency market cap dropped roughly 70% since mid-January, according to CoinMarketCap.
Summary
The number of new crypto hedge funds is rising sharply even as the broader crypto market has struggled in 2018, according to a new report from Crypto Fund Research, a provider of analysis on crypto investment funds and republished by the World Economic Forum. The report counts 90 crypto hedge funds launched globally since the start of 2018, with the total on pace to reach 120 by year-end. If that pace holds, crypto funds would account for 20% of all hedge fund launches in 2018.
The growth follows a sharp rise in popularity over the past two years. Crypto hedge funds made up 3% of new hedge funds worldwide in 2016, and that share climbed to 16% in 2017. The phenomenon is now global: the report cites new fund launches in Australia, China, Malta, Lithuania, the UK, and Mexico this year, with about half of the 2018 launches based in the U.S.
Assets remain small relative to the broader industry. Crypto hedge funds manage less than $4 billion, compared with more than $3 trillion across the global hedge fund industry. The article attributes the cautious institutional approach to the sector's extreme price swings, regulatory uncertainty, potential for fraud, and new enforcement actions against crypto firms. According to CoinMarketCap, Bitcoin has fallen about 66% from its January peak, and the total cryptocurrency market capitalization has dropped roughly 70% since mid-January.
For allocators, the report highlights a divergence between fund formation and capital deployment: manager interest is accelerating while institutional assets remain marginal and the market faces significant drawdowns.
The growth follows a sharp rise in popularity over the past two years. Crypto hedge funds made up 3% of new hedge funds worldwide in 2016, and that share climbed to 16% in 2017. The phenomenon is now global: the report cites new fund launches in Australia, China, Malta, Lithuania, the UK, and Mexico this year, with about half of the 2018 launches based in the U.S.
Assets remain small relative to the broader industry. Crypto hedge funds manage less than $4 billion, compared with more than $3 trillion across the global hedge fund industry. The article attributes the cautious institutional approach to the sector's extreme price swings, regulatory uncertainty, potential for fraud, and new enforcement actions against crypto firms. According to CoinMarketCap, Bitcoin has fallen about 66% from its January peak, and the total cryptocurrency market capitalization has dropped roughly 70% since mid-January.
For allocators, the report highlights a divergence between fund formation and capital deployment: manager interest is accelerating while institutional assets remain marginal and the market faces significant drawdowns.
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