Nearly 70 crypto-focused hedge funds that largely cater to institutional investors, such as pension funds and family offices, have closed this year. And while the startling number reveals the influx of institutional investors into the crypto space might not be happening at a fast pace, it’s also worth noting that crypto fund launches are projected to reach 140 by the end of the year. That’s despite the prolonged 2018 crypto winter followed by an unstable recovery in 2019.
The figure that caught Bloomberg’s attention refers to the closures of crypto-focused hedge funds mostly catering to pensions, family offices and wealthy individuals. North America (28) and Europe (23) account for the bulk of the 68 closures in the face of continuing market volatility and regulatory uncertainty.
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Crypto Fund Research provides insight and analysis on cryptocurrency hedge funds and venture capital funds.
The inherent volatile nature of bitcoin and other cryptocurrencies has kept institutional investors at bay. “The market is definitely retail driven and will remain so for the foreseeable future,” Nic Carter, co-founder of crypto market tracker Coin Metrics, was quoted as saying in the report.
The platform’s analysis shows that the number of funds has been increasing in the long run, however. For example, 291 crypto funds, including hedge funds and venture capital, were launched in 2017, out of a total of around 700 hedge funds that year. The number increased with almost the same amount in 2018, which saw 284 crypto fund launches. For comparison, only 152 were established before 2014 and then the following three years saw between 36 and 46 launches annually.
The Market Value
Although most crypto investment funds are small, with half of them managing less than $10 million worth of assets, there are almost 60 funds with over $100 million in assets and the same number of funds have more than 25 employees. These include funds such as Pantera Capital, Galaxy Digital Assets, Alhpabit Fund, and Polychain Capital.
“To me, the fact that there is any institutional adoption for Bitcoin only 10 years into existence is a radical success and beyond what anyone could have imagined just 3 or 4 years ago,” Spencer Bogart, general partner at Blockchain Capital, was quoted as saying in the report.
The long term trend is positive with the value of crypto assets under management increasing from $190 million in early 2016 to over $19 billion as of October 2019. The market intelligence platform concludes that the crypto fund industry has been growing rapidly in the past few years. Despite the sharp fall of crypto prices during last year, the growth of new funds and fund inflows contributed to the rising total of managed assets in the sector.
How Many Are They?
There are currently 804 cryptocurrency and blockchain funds, 355 crypto hedge funds and 425 crypto venture capital funds, according to the San Francisco-headquartered company. San Francisco is the city that hosts the largest number of funds, 79, New York is second with 74 and the other global financial capital, London, comes in third place with 49. Almost 400 crypto funds are based in the United States, followed by Hong Kong with 84, the United Kingdom, 55, and Switzerland with 26.