Hedge Funds love profits and double-digit returns on investment. While there are hundreds of hedge funds which does algorithmic trading on stocks and other financial instruments, cryptocurrency hedge funds are a new thing and they are growing at a really faster rate. The volatility is being observed as the most important reason for the increased number of funds doing algorithmic trading the cryptocurrencies.

According to the data compiled by the financial technology research house, Autonomous NEXT, the number of hedge funds grew by 100% in the last 4 months from 110 in Oct 2017 to 226 in Feb 2018. The assets under management also have increased to around $5 billion.

The increase in the number of funds also come at a time when the price of cryptocurrencies is very volatile and the overall market cap of the cryptocurrencies has decreased by around 30% during the recent market correction.

A partner from the Autonomous NEXT has quoted saying, “While the softer prices of crypto assets does create a more difficult environment for investors, I do not think it will pause the influx of funds and other financial institutions building products in the space”

Returns on Investment

2017 was the greatest year yet in cryptocurrency investing where the prices literally skyrocketed before settling down in 2018. Some of the hedge funds have reported an average return of more than 1400% and most of these returns have been accumulated by holding the cryptocurrencies until they reached all time high.

Apart from trading cryptocurrencies, some funds have been diversifying the investments by participating early in various Initial Coin Offerings(ICO’s). Participating early in a good ICO would give a greater return when the coins are traded publicly on various cryptocurrency exchanges. FileCoin, for example, has seen early participation from multiple funds and venture capital firms alike.

The list of various cryptocurrency hedge funds which are actively participating in the ICO’s includes Token Capital, BitSpread. Some of these firms are also charging very high fees and taking a significant portion of the profits, but the clients seem to not worry about this because of the very high returns compared to the traditional financial instruments.

Many large enterprise hedge funds might follow the suit in 2018 and diversify their trading strategies between Crypto and traditional financial instruments.

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