Key Takeaways
- • Soros Fund Management received internal approval to trade cryptocurrencies, with Adam Fisher, head of macro investing, authorized to make cryptocurrency bets, though no positions have yet been established as of early April 2018.
- • Bitcoin declined 67% from its December 2017 peak of $20,000 to approximately $6,600 by early April 2018, while cryptocurrency-focused hedge funds lost an average of 52% in value during the first quarter of 2018, significantly underperforming traditional hedge funds which gained 0.4%.
- • Despite 2018 weakness, cryptocurrency hedge funds initiated in early 2017 have generated average returns of 2,908% through April 2018, compared to 9% returns for traditional hedge funds over the same period, demonstrating substantial early-mover profitability in the sector.
- • Regulatory scrutiny from global authorities has intensified, coinciding with declining investor interest in cryptocurrencies as evidenced by falling Bitcoin-related search volume, creating headwinds for new cryptocurrency fund launches—only 20 opened in early 2018 versus 167 in 2017.
Summary
Soros Fund Management, the family office of billionaire investor George Soros, has received internal authorization to actively trade cryptocurrencies, marking a notable entry into digital assets by a traditionally mainstream hedge fund titan. According to Bloomberg reporting cited by Fortune, Adam Fisher, who heads macro investing for the fund, secured approval to execute cryptocurrency trades, though as of early April 2018, no cryptocurrency positions had yet been initiated.
The timing of this approval comes amid severe market headwinds in the cryptocurrency sector. Bitcoin, which serves as the bellwether for cryptocurrency valuations, has collapsed from its December 2017 all-time high of $20,000 to approximately $6,600—a decline of roughly 67%. This weakness has cascaded across the broader digital asset ecosystem: cryptocurrency-focused hedge funds shed an average of 52% in value during the first quarter of 2018, starkly contrasting with traditional hedge funds' modest 0.4% gain over the same period.
However, the extended timeline reveals substantial profitability for early-stage cryptocurrency investors. Cryptocurrency hedge funds established at the beginning of 2017 have generated average returns of 2,908% through April 2018, substantially outpacing conventional hedge fund gains of 9% over the same period. This performance disparity underscores the dual nature of the asset class: exceptional gains for timely entrants balanced against significant current volatility and drawdowns.
The sector faces mounting regulatory headwinds globally, which have dampened investor enthusiasm and correlate with declining search interest for Bitcoin. The regulatory environment shift is reflected in fund formation trends: 167 cryptocurrency-related hedge funds launched in 2017, but only 20 opened in the first quarter of 2018. Soros Fund Management's internal approval suggests that despite public skepticism from some institutional investors regarding cryptocurrency viability, sophisticated asset managers continue to evaluate strategic allocations to the asset class despite its nascent regulatory infrastructure and volatility profile.
The timing of this approval comes amid severe market headwinds in the cryptocurrency sector. Bitcoin, which serves as the bellwether for cryptocurrency valuations, has collapsed from its December 2017 all-time high of $20,000 to approximately $6,600—a decline of roughly 67%. This weakness has cascaded across the broader digital asset ecosystem: cryptocurrency-focused hedge funds shed an average of 52% in value during the first quarter of 2018, starkly contrasting with traditional hedge funds' modest 0.4% gain over the same period.
However, the extended timeline reveals substantial profitability for early-stage cryptocurrency investors. Cryptocurrency hedge funds established at the beginning of 2017 have generated average returns of 2,908% through April 2018, substantially outpacing conventional hedge fund gains of 9% over the same period. This performance disparity underscores the dual nature of the asset class: exceptional gains for timely entrants balanced against significant current volatility and drawdowns.
The sector faces mounting regulatory headwinds globally, which have dampened investor enthusiasm and correlate with declining search interest for Bitcoin. The regulatory environment shift is reflected in fund formation trends: 167 cryptocurrency-related hedge funds launched in 2017, but only 20 opened in the first quarter of 2018. Soros Fund Management's internal approval suggests that despite public skepticism from some institutional investors regarding cryptocurrency viability, sophisticated asset managers continue to evaluate strategic allocations to the asset class despite its nascent regulatory infrastructure and volatility profile.
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