Key Takeaways
- • The VisionTrack Crypto Hedge Fund Composite Index lost -1.39% in July, bringing its year-to-date return to +22.66%. Bitcoin fell -4.07% (YTD +76.47%), the Bloomberg Galaxy Crypto Index declined -0.63% (YTD +55.38%), and ETH lost -3.99% (YTD +54.86%).
- • CoinShares reported -$107M of digital asset investment product outflows in the final weeks of July, the third-largest drawdown of the year, though single- and multi-asset products still recorded +$364.5M net inflows year-to-date.
- • Crypto venture capital fundraising targets tracked by VisionTrack total roughly $4B across 33 funds, down from ~$33B across 179 funds in January through August 2022.
- • Bitcoin 30-day realized volatility fell to near all-time lows, with daily volatility touching 0.17 on July 18, a level not seen in over five years, followed by nearly $1B in 24-hour liquidations across assets.
- • Galaxy Digital argues that fundraising for active crypto funds depends on Bitcoin outperformance and US spot ETF approval, a view presented as the author's opinion.
Summary
Galaxy Digital's July 2023 Crypto Hedge Fund Performance Update reported modest performance across crypto and digital asset hedge fund strategies. The VisionTrack Fundamental Index declined -0.82% in July (YTD +39.97%), the VisionTrack Quant Directional Index fell -3.13% (YTD +13.76%), and the VisionTrack Market Neutral Index added +1.39% (YTD +8.69%). Bitcoin and ETH both declined in July despite a rally in speculation that a US spot Bitcoin ETF would attract significant inflows. Fundstrat's Tom Lee, speaking on CNBC, said that if spot Bitcoin were approved, demand would exceed daily supply, predicting a price above $150,000 per Bitcoin.
Flow and market data pointed to profit-taking. According to CoinShares, digital asset investment products recorded $107M of outflows in the final weeks of July. WuBlockchain data showed futures trading volume on major centralized exchanges fell 7.6% in July, while spot volume was flat. Bitcoin's 30-day realized volatility declined to near all-time lows, and Bitcoin, which traded around $28,000 to $29,000, moved below $26,000 at the time of writing.
The report said fundraising for actively managed crypto products is increasingly dependent on Bitcoin's performance and US spot ETF approval, with other crypto sub-sector narratives lacking traction among retail and institutional investors. Many new crypto hedge funds have not reached target capacity and remain focused on centralized exchange trading of top assets by market capitalization. Crypto venture capital fundraising, at roughly $4B across 33 funds, has fallen sharply from the 2022 peak.
On macro conditions, the report cited an effective federal funds rate of 5.33%, a 10-year Treasury yield of 4.32% (described as the highest in over a decade), and a 2-year yield of 4.97%. US CPI was 3.2% year-over-year against a 3.3% expectation, and core CPI was 4.7%, in line with expectations. Truflation, which uses on-chain data, put US inflation at 2.72%. The author expects the Federal Reserve to eventually cut rates given high federal debt, and suggests a return to 2% rates could occur in 2024 to 2025. These forecasts are the author's views and are not guaranteed to materialize.
The author concluded that low volume and volatility should not be a concern over a longer horizon, and that allocators would be better positioned for alternatives if a Bitcoin spot ETF were approved.
Flow and market data pointed to profit-taking. According to CoinShares, digital asset investment products recorded $107M of outflows in the final weeks of July. WuBlockchain data showed futures trading volume on major centralized exchanges fell 7.6% in July, while spot volume was flat. Bitcoin's 30-day realized volatility declined to near all-time lows, and Bitcoin, which traded around $28,000 to $29,000, moved below $26,000 at the time of writing.
The report said fundraising for actively managed crypto products is increasingly dependent on Bitcoin's performance and US spot ETF approval, with other crypto sub-sector narratives lacking traction among retail and institutional investors. Many new crypto hedge funds have not reached target capacity and remain focused on centralized exchange trading of top assets by market capitalization. Crypto venture capital fundraising, at roughly $4B across 33 funds, has fallen sharply from the 2022 peak.
On macro conditions, the report cited an effective federal funds rate of 5.33%, a 10-year Treasury yield of 4.32% (described as the highest in over a decade), and a 2-year yield of 4.97%. US CPI was 3.2% year-over-year against a 3.3% expectation, and core CPI was 4.7%, in line with expectations. Truflation, which uses on-chain data, put US inflation at 2.72%. The author expects the Federal Reserve to eventually cut rates given high federal debt, and suggests a return to 2% rates could occur in 2024 to 2025. These forecasts are the author's views and are not guaranteed to materialize.
The author concluded that low volume and volatility should not be a concern over a longer horizon, and that allocators would be better positioned for alternatives if a Bitcoin spot ETF were approved.
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